Today’s a good day to post on my angel investment experience, because this afternoon I’ll be speaking to a group on this subject in Corvallis, Oregon. What I want to do is just describe how it went for me, one set of eyes, one viewpoint, without making any generalizations about the rest of the world of angel investing.

Last February I joined Willamette Angel Conference (WAC), an angel investment group in the southern Willamette Valley, including Eugene and Corvallis. Here’s what happened. 

• It started for me with the discovery, in early February, that the buy-in price was $5,000 plus $250 in fees. I always thought of angel investment as a matter of putting $50K or $100K or more into a startup. But I could manage $5K.
• The group entity was an LLC of which every member had shares depending on how many $5K shares he or she signed up for.
• I had to certify that I’m an “accredited” investor. Nobody audited my books or anything, but I did have to sign a paper guaranteeing that I met the Securities and Exchange Commission (SEC) guidelines. Details of that here. The point is that this is a very risky investment, and you have to be able to just plain lose that money.
• I got access to Angelsoft.net for the WAC group. There were 43 potential investments submitted to the group by late March.
• We – about 25 members, each of whom had at least one $5K share in the group — met in the evening every Monday in April. In our first meeting we narrowed the 43 plans to 13 (we had aimed for 15, but there was a natural break at 13). In the next two meetings, we studied the 13 remaining plans. We listened to pitch presentations by the entrepreneurs, and asked questions. We divided into smaller teams to visit their offices, if possible, and talk to them. In the last April meeting, we chose five finalists, and divided into groups, again, to look at them in more detail.
• In a last evening meeting in early May, we shared additional information on the five finalist companies.
• At an all-day event in middle May, we heard presentations again along with an audience of several hundred people, and voted a winner.
• My wife an I now have a small equity share in CenterSpace Software, of Corvallis, the winner we (the investor group) chose.

From my point of view, as someone who’s raised VC money for my own company and been on the board of a company that raised VC money and went public quickly, has taught entrepreneurship and consulted to VCs, and has mentored a lot of startups, and judged business plan competitions, it was an extremely satisfying role reversal to sit on the investor side of the table. I enjoyed the meetings thoroughly. I read the business plans, paid attention to the pitch presentations, asked questions, and enjoyed meeting and working with the other investors. This was all good.

I liked this experience so much that this autumn I agreed to be investor chair for next year’s version.

If this sounds interesting to you, look for local angel investment groups in your area. Ask your Chamber of Commerce. Browse the Web. Go look at Angelsoft.net.

(Photo credits: Willamette Angel Conference)

Imagine yourself as judging a business plan competition. You read the plan, watch and listen to the pitch, ask questions, and consider the answers. What do you do, in that situation, with a team whose opportunity is in your opinion bigger than it realizes? What about a team whose opportunity is different from what it realizes?

Do you reward the team for what you’re thinking and they aren’t? For the opportunity they’ve built that they don’t see?

For example: a team is trying to do too much too fast, spreading the business way too thin, and therefore losing, in your opinion, a really interesting opportunity at hand. That opportunity would require focus, and they’re trying to do way too much.

Another example, almost the opposite of the first one: the team is focusing very narrowly on a hard market, not seeing what you think is a much more interesting and easier to address market in a different direction.

Is it the best business opportunity, based on the assumption that this team will listen and redirect? Or is it the best business plan?

Having seen similar situations as angel investor, I want to put my money where the opportunity is; as long as I can reassure myself that the team will see it as I do. But as a judge in a venture or business plan competition, I think I have to go by what the team says, not what I think it could have said.

What do you think?

I’m leaving for New York city today to participate as a judge tomorrow in the Forbes.com Boost Your Business business plan contest. This will be my second year. I love it.

I like judging business plan contests. I’ve judged the two big contests in Texas, both the University of Texas Moot Corp and the Rice University contest. I’ve judged the University of Oregon’s New Venture Competition 12 times. I’ve also judged at Notre Dame University, University of San Francisco, and some others.

As I leave to judge this one, I’m thinking about five reasons why I really like it:

1. It’s open to any U.S. business, MBA-related or not. The MBA contests are reserved for teams with MBA members. Forbes is for everybody.
2. The criterion for winning is simple and easy to understand. The winner is the business that can do the most good with $100,000. That doesn’t make the decision easy at all, but it makes the competition clear.
3. The public gets to vote; not just the judges. The public vote helped choose the five finalists from the 20 semi-finalists you can see on the Forbes.com Website right now. The vote is closed now but soon you’ll be invited to view the five finalists.
4. The competition is available online. Anybody can go to the Website to see the presentations, questions from the judges, the entrepreneurs’ answers, and vote on the winner.
5. The prize is simple and easy to understand: $100,000 for your business. It’s not an investment, or a loan, or goods valued at whatever; it’s half in good old fashioned money, and half in advertising.

You can see for yourself on the website: click here for the Forbes.com contest site.

I posted 10 questions on this topic last week.  Today I have three more, on the same topic.

It sounds attractive, doesn’t it? Get a business plan by hiring somebody to do it for you? I can see how you’d think of that as division of labor, like hiring an expert to do design, or programming; have an expert do a plan. And you can do that, if you’re careful; but you really have to understand the underlying management questions, what you’re getting, and what you want.

Still, here are 3 more questions:

1. What would you estimate to be the hourly rate of somebody with business experience, financial knowledge, and computer knowledge to do a competent business plan?
2. How many hours would you expect that person to take?
3. What would you get if you multiplied that hourly rate question by the number of hours question?

I don’t know about you, but I’d estimate $200 or so per hour for that first question. It would depend on the market, and the specific person, but we’re probably talking about MBA or CPA. I’d say 20-40 hours for the second question, although that depends too, on other factors. And for the third question, multiply $200 times 20 hours and you get $4,000.

So what are you planning to pay that business plan writer?  And how is it that I see business plan writing advertised for a few hundred dollars? How do they make money like that? And if the plan writers’ prices are that cheap, is the plan quality cheap as well?

(Photo credit: Artem Samokhvalov/Shutterstock)

Somewhere somebody described to me the process in which Michelangelo imagined his David from inside a flawed block of granite marble that had a crack in it. The crack became the hitch in David’s arm as he holds the sling.

I think that’s something like real business strategy. The general type of business, what other people would assume it to be, is like the uncarved block of marble. The strategy is locked inside it. And the end result is created by what you take away.

So, for example, a restaurant’s strategy is about what it doesn’t do. One of my favorite restaurants serves very healthy fast foods. That’s what it’s doing. What it isn’t doing is sit-down table service, breakfasts, cheap meals, drive-through, date dinners, and on an on.

Then there’s the attorney I’ve dealt with for years who sent me to somebody else for IP law, and to a different person for litigation, and yet another for employer law. What he does is small business law. And what he doesn’t do is much bigger.

First you define your market in general terms by describing your target market segments. Then you define it better by defining who, within that segment, isn’t your customer, and why.

First you define your general strategy by what it is that you do. Then you refine it by defining what it is, within that general description, that you don’t do.

(Photo credit: K Patel 1980/Flickr)

No, it’s not that I have anything against business plan writers for hire. I spent some years doing that, although I never just wrote the plan; I always facilitated and translated and coached planning. (Unless, of course, you’ve read my post on my worst business plan engagement, in which case you’ll know I’ve used “never” and “always” wrong in the above).

1. If you wanted to get your body in shape, would you hire somebody else to eat better and exercise regularly?
2. How would you feel about sending somebody else to the doctor to be examined to determine your health?
3. How do you feel about pre-packaged vacations?
4. What would you tell your ghost writer? How long would that take you? Could you type that out, maybe? Could you do it in YouTube?
5. How will you deal with questions that come up, after the plan is done?
6. How much good will a single one-time plan document do you?
7. What will you do about revisions later on? Will you just accept a plan done once, and never revise?
8. How long would you estimate is the average shelf life of a written business plan, before it begs for revisions?
9. What would you do about regularly reviewing and revising a business plan that some outside business plan writer had written?
10. How would you get a team of people committed to a business plan that an outsider wrote?

(Photo credit: Linn Currie/Shutterstock)

The business.gov site has posted my business plan tutorials, a collection of 13 videos covering business planning for real businesses. We’ve been working on this since last Spring, and I’m very happy to see it done and available now. I’m grateful to the team that put it together for me.

And I’m also happy to say it covers both the formal business plan and the more practical modular business planning as a management tool. This support is not just for businesses that need to show somebody a business plan document, but for all businesses. It’s planning as management, like steering.

Sections discuss on how planning is modular, and form follows function, and planning is management, it points to the more practical everyday management use of business planning. There’s also a section on the Heart of the Plan, which is strategy; and another on Flesh and Bones, which is the core elements of dates, deadlines, task responsibilities, and basic numbers.

I’m very pleased to be included in the business.gov site, which seems to me to be a very timely new effort to consolidate the government’s offerings to small business into a single site that also operates as a community. 

If you’re at all interested in business planning, whether or not you need a business plan document to show to outsiders, I hope you’ll drop by the tutorials page at business.gov/start/business-plan-tutorials.html. It was a lot of work, for me and the team at business.gov that put it together, and I’d like to think it’s very useful. You don’t have to go start to finish in order, either. If you have just four minutes to spend, click on the “Form Follows Function” link. That’s my personal favorite.

There can be great truth in stories. People have communicated in stories from the very beginning. We use stories to tell about God, family, each other, and business. Stories can be true or false by the message they carry, not just what happens in the story. Fables, parables, short stories … think about how much you learn, and teach, with stories.

Can a story tell truth without being technically factual? I think we all know it can. Is the lesson of sour grapes less true because there was no original fox? Or is the story of the gingerbread man not true?

Marketing is all about stories. (Aside — great book in this area, All Marketers are Liars, by Seth Godin). There’s the story of how it started, the invention of whatever it is you’re selling, or the invention of your business itself, the story of the brand, the packaging, the formula, or whatever. There’s the story of how the customer finds the solution. There’s the story of how the customer problem is solved.

A good business plan is a collection of stories. Your vision is a story about the future. Even financial projections are stories, told in numbers. If we sell this many units at that price, we have this much in sales; but we also have to spend this much in rent, and so on.

As a frequent reader of business plans, I look for the stories. The most important is the story of the customer, the solution to a problem, the path to find it, and the decision to buy. I also look for the story of the startup, and the story of the growth in the future. I want them to be convincing.

(Photo credit: Pixelbliss/Shutterstock)

It’s all paradoxical. Bill Cosby once said:

“I don’t know the secret to success, but I do know that the secret to failure is trying to please everybody.”

While driving to the office a few minutes ago, I saw an unusual Fedex truck, like a stunted-growth moving van, with the signage: “Fedex White Glove Service.” I don’t know what that is and I don’t care particularly but it made me think how Fedex has expanded past its initial vision of “it absolutely positively has to be there tomorrow.”

Do you think it’s true that businesses have to stay focused when they’re small but develop peripheral vision as the grow?

What I know about Fedex is what I see on television mostly, but it seems like an example of peripheral vision. From that first “absolutely positively” focus on overnight to two-day, then three-day, then bulk, then Kinkos, international somewhere in the mix, now white glove service (whatever that is, it’s about moving, I can tell by the truck).

So that seems like the opposite of focus: peripheral vision, perhaps? Moving from where you are into nearby markets. Seems like a good thing when it works, but do we hear about it when it doesn’t? When businesses lose focus? When starbucks tries to offer cheap coffee, or McDonalds offers fancy lattes?

There’s a lot to be said for understanding who isn’t your customer. And, on the other hand, not arguing with success.

The displacement principle: everything you do rules out something else that you don’t do. It seems to belong inside this paradox.

(Photo credit: from Expediters Online. Click the picture to link to the page.)

For years I’ve lived with my own “root canal theory of business planning.” Do the Google search for that phrase and you’ll see that my previous writing about this comes up first. Like root canals, business plans were something people dreaded, but needed. Happily, things have changed.

Unlike a root canal, modern-day business planning should not be painful, is not something you do all at once, and ought not to be a cure for anything like a toothache. Instead, it should be fun and interesting, and a regular process. It’s preventative, not curative. I call it plan-as-you-go business planning. The plan stays alive. It’s not painful to do, you like doing it because you’re running your own business and the planning part of it is fascinating. It’s your future, your life, and controlling your destiny.

It’s only now-obsolete myths that liken the business plan to the root canal. They might have been true in the past, but are definitely not true anymore.

I had the worst kind of reminder yesterday: a root canal. This one repaired one done 20 years ago. Root canals have changed. Technology has improved. But they’re still bad.

It was just after having that first root canal that long ago that I developed the root canal theory of business planning. I’d had a horrible toothache back then, a sleepless night, and by the time I got to the dentist chair the next morning I really, really wanted that root canal. I wanted the pain to end.

Back then — late 1980s — I thought about how people only did business plans when they absolutely had to, for investment or business loans; and about how when they did have to, they wanted that business plan fast, and they wanted it badly. But it seemed like nobody who didn’t have the urgent need wanted to do a business plan. Our fulfillment house noted that our business plan software orders had the highest ratio of overnight shipping of all their clients.

Today I believe what I posted on this blog two years ago: If you dread business planning, keep your day job.

(Photo credit: cc license by radiant guy, on Flickr.)