Business Plans for 13 Year Olds

With the popularity of Web 2.0 and clean tech I am seeing more and more business plans in these areas.

The Web 2.0 plans almost all involve some form of social networking site and increasingly these sites are targeting more defined and narrower customer segments. This is a good trend, but fewer and fewer plans make clear why anybody would want to come to the site and more importantly use it. Everybody believes their site will go viral or Google ads will make the site a success. If it were this easy I would have already launched my social networking site for television animal personalities (I am particularly fond of the beaver with the blackberry that drinks lattes and promotes sleep medicines). Few entrepreneurs ever explain why a particular marketing plan matches their target customer or how their site will specifically match the particular needs of a target customer. Another way of looking at the issue is-- why should somebody come to your site instead of creating a group on Facebook or a social network on Ning. If you can answer these questions maybe you have a real business idea, but if all you can say is "we are going to offer better customer service, better security and videos"-- then maybe you should go back to the drawing board.These factors are not a sustainable advantage for very long, if at all. Most of the new social networking business plans I have seen recently never describe any real differential advantage. They lack this critical component because they have not developed a very profound understanding of their target customer. They have correctly picked an underdeveloped market segment but they have not really understood the customer.

The clean tech plans typically have a completely different problem. Many of them are based on carbon credits related to the Kyoto Protocol. I have yet to read a plan that relies on carbon credits and can intelligently explain how these credits get turned into cash. Last week I met with an experienced equity salesman. After my client fumbled around for ten minutes trying to explain a simple business, this old pro asked a simple question--how would you explain this business to a 13 year old. While many clean tech entrepreneurs do not yet have 13 year old children to practice on, maybe they could use this concept anyway. (Note: 13 year old rule is a good test for any business concept.)

If people can not understand the business they will not fund you.If you can not explain the concept in terms a 13 year old can understand then you have not achieved the level of simplicity required.

Tommorow I will be judging the final round of the business plan competition at the FIU Entrepreneurship Center. When judging these competitions I almost never read the financial plans unless the business concept is sufficiently well explained to merit the extra effort. Hopefully someone's presentation will inspire me to take a look at their financials. I hope so or otherwise it is going to be a long day.

Comments

[Kendall]

This looks like a "heads up" to your students telling them, if your summary sucks, you better stay up all night redoing it. Nice!

[bal]

Nice to meet you.
I had a look at blog.
Please link to this site.
http://finance00.seesaa.net/

[Robert Hacker]

Kendall--you conspiracy thinker
Everybody knows students stay up late the night before the business plan competition finishing up those 27 year financial plans.
Bob

[rick]

My real question is, why are you wasting your time with tossers for clients?

"After my client fumbled around for ten minutes trying to explain a simple business"