Business is war, or at least so say the Japanese. For business or in battle, tactics comprise certain precepts. Here are fundamentals:

  • “Get there first with the most,” said a famous Civil War general. Strike first, hit hard, hit repeatedly and keep moving.
  • Draw strength from being well-grounded. Be confident by having a strong base of support, including knowledge, skill, positioning, and resources.
  • Attack where the enemy is not. Don’t try to slug it out, squared-off trading blow-for-blow. Probe to find a vulnerable spot. Where your opponent is inferior—strike.

These principles have been understood for ages; yet, entrepreneurs often fail to show an appreciation for sound tactics when they pitch their business models to investors. An entrepreneurial business plan may include placeholders for notions such as strategic relationships, sales channels, customer segments, and revenue streams, which are vital to understand; only, without tactics to answer “how to,” lists of business objectives remain…wish lists.

Let’s take the precepts listed above and consider how they apply to a section of the business plan that’s often given short shrift: the entrepreneurial sales model.

Nothing happens in business until something gets sold. Selling is often the main challenge entrepreneurs face; yet, many entrepreneurs look to raise capital for their business without having formulated tactics for growing sales. To start, an entrepreneur must realize the imperative to strike effectively first.

There’s a type of business proposal that we call an “also-ran” or “me too” model. The pitch usually starts out by claiming a new business will become the [fill in the unicorn] of such-and-such market niche. “The Uber for visitors to state and national parks,” “the Airbnb of assisted living communities,” “Facebook for dial-up Internet users….” The imputation is that because of whatever billion-dollar success a Silicon Valley “unicorn” company enjoys, the “also-ran” startup should be expected to earn similar growth…just because. “Just because, our business notion is like the industry leader’s business,” an entrepreneur might argue.

“So, the new business should sell itself?” we’d respond.

The reason unicorn companies became billion-dollar successes has much to do with those businesses having struck effectively first. After securing a “beachhead” into a new, unserved, or maybe under-served yet substantial market, the industry leaders accelerated sales by moving smartly to dominate their niche, expand offerings, stay nimble in response to customers’ needs, and capitalize on brand value. Entrepreneurs should take a lesson from successful growth companies: Make a beachhead into a potentially profitable, sizable market niche that can be defended against competitors. Investors will want to hear in some detail how an entrepreneurial firm plans to fight its way off that beach. Mainly, investors want to know that a startup or entrepreneurial growth company is prepared (has the talent, has the resources, has the discipline) to move fast, fast, fast to drive sales.

We should remember Winston Churchill’s famous speech during World War II:

“We shall fight on the beaches…we shall fight on the landing grounds…we shall fight in the fields and in the streets.”

His rhetoric evoked images of a marauding army breaking out—which is what every disruptive entrepreneur must accomplish! Think of it this way: To incumbents in any industry, the entrepreneur represents a threatening, invading force. Even before the war, Churchill had foreseen a threat of invasion. He’d worked tirelessly to put forces in order, to gather resources, and to raise a fighting spirit. A soldier himself, he knew much about tactics: Defending or attacking, he knew that to win, he needed a secure base. Winston counted on support in the nation; moreover, he drew strength from his actions being well-grounded, even during the country’s “darkest hour.”

As his nation’s wartime leader, Winston Churchill took as a matter of course that there could be no alternative to success. It’s sad that many entrepreneurs today are convinced it’s “okay to fail.” They’re advised that an entrepreneur should “plan to pivot.” Only, from an investor’s perspective, with money at risk, it’s never “okay” when a business fails. And pivots burn precious time and money. Yes; a dramatic change of plan or pivot becomes sometimes the only way to save a venture after an entrepreneur’s original idea goes awry. But to plan to pivot suggests that the entrepreneur would knowingly enter into business from an inadequate starting position—from poor ground. One may be forced onto bad ground by circumstances, but never elect to start a contest on ground that’s against one’s choosing! This, again, is where sales tactics figure in to business planning: An investor wanting to know a company’s entrepreneurial sales model expects answers to specific questions: How has the company identified its (narrowly defined) target market? How will the business generate qualified sales leads? How will the company communicate directly to the target market? How will the firm delight its customers and what will it cost to do so? How will the business know it has chosen the right target market? How will the company measure selling activity and success?

Investors must judge an entrepreneurial sales model on the strength of answers to questions like the ones above. If the answers investors receive are inadequate, investors will suspect that entrepreneur is working from a weak base of support.

“Well, aren’t all entrepreneurs starting out from a weak base? Isn’t entrepreneurship a David-and-Goliath story in nearly every case?” (Leaving aside the not-inconsiderable advantage David had as God’s champion…) Investors should agree that tactics are what can turn odds for success to one’s favor. It’s why there are such notions called “tactics.” Sound tactics compensate for liabilities; tactics amplify strengths. Young David’s decision not to stand toe-to-toe with a nine-foot tall, armor-wearing, seasoned killer—but rather to use a stand-off sling weapon—was tactical brilliance. David engaged from a safe distance. He attacked from where Goliath was not, and where the enemy was vulnerable, he struck. David’s tactics showed superior use of his particular knowledge, skill, positioning, and resources—which can sometimes be as basic as aiming a stone picked up off the ground.

Investors: Do the entrepreneurs that pitch to you appear destined a suffer a battle of attrition against their competition? Are they trading blow-for-blow with the other side? Or have they impressed you by having more compelling sales tactics—perhaps showing a way to capture attention and influence buyers that’s the rhetorical equivalent of their slinging a stone from an unexpected distance? Or from a better angle?

In the 19th century, a Prussian general and theorist named Von Clausewitz stated that war was a “combination of distinct engagements,” and that “only a combination of successful engagements can lead to good results.” Clausewitz’s theories are studied to this day in our military institutes. To Clausewitz, strategy was the combination of individual engagements leading toward eventual victory, but tactics were how each distinct engagement could be won. Entrepreneurs will recognize that every sale for their business is the result of a distinct “engagement.” That tactics are what leads to conversion of a prospect into a customer. String together enough sales conversions, and a business may succeed. Lose enough sales, and the war that a startup is fighting will invariably be lost.

Investors will keep in mind Clausewitz’s warning:

“Everything in war is simple, but the simplest thing is difficult. The difficulties accumulate and end by producing a kind of friction that is inconceivable unless one has experienced war.”

We could easily change “war” in that last sentence to read: “entrepreneurial business.” Entrepreneurs must face seemingly endless difficulties, while the original idea for any new business often seems the “simplest thing.” But it will be tactical principals, which can be spelled out in a business plan, that will impress investors. And tactics will keep inevitable “friction” from overcoming necessary momentum in an entrepreneurial sale model.

So what does this all mean?

The implication is simply that wide-eyed visionaries with great ideas are the starting point. Until they can plan a business, they are not ready to be real entrepreneurs. I fall back to a quote I heard several years ago:

You are not an entrepreneur unless you are selling something, otherwise you are an inventor. – Alex Lavidge

This is where you have to decide on the ability of the entrepreneur to transcend into viable business and sales models. If you believe the entrepreneur has the capacity to become a true entrepreneur, then you have to shift your focus to becoming a mentor, help them transcend, and hold them accountable. If not, then politely dismiss the dreamer and move on to the next deal.

This is published under the Appalachian Regional Commission POWER Grant, PW-1835-M.

Copyright Appalachian Investors Alliance, Inc. 2018
@angelcapitalgr | @appalachianinvestors | | |