“The times aren’t just a-changin’, they’re a-changin’ at breakneck speed.” This was my thought last week while preparing a lesson for the university course I teach every year (Entrepreneurship for Engineers at University of Victoria).
In this particular lesson, I help the students understand how the success of their venture will be assessed by potential funders. I’ve been using a checklist from a 2009 book called “Preparing Effective Business Plans” by Bruce Barringer. Going through my slides I realized that some of the criteria have declined sharply in relevance for many businesses, particularly new ones, and especially technology firms.
Some items relating to “resource sufficiency”, in particular, are less, or no longer, relevant:
- Does a business really need to worry so much about the local availability of office space or personnel?
- Do small businesses worry about intellectual property protection any more?
- Is the support of local government important to new ventures?
- Is geographic proximity to suppliers and customers still important?
And some of the wording in the financial feasibility section also seemed to be out of step with current business expectations and timeframes:
- Can anyone, even an established business, reliably predict “steady, rapid sales growth” in the next “1 to 3 years”?
- Who can “forecast income and expenses with a reasonable degree of certainty”?
It’s vitally important that the expectations of entrepreneurs and potential funders is aligned. If not, new businesses that are assessed with traditional criteria will be less likely to get funding. Which means our communities will be denied the energy, creativity, innovation, employment and taxes that new ventures bring.
Traditional lenders (and educators!) must update their assessment criteria to better consider these shorter timeframes and the global access most businesses have to resources and markets.
For their part, entrepreneurs must design their business strategy with multiple short phases, each of which will require less capital and focus on a single element that reduces the venture’s risk.
And both should spend more time looking at the future, which is arriving faster and faster with each passing year. More on this next time.