This interview first appeared on Mixergy.

Noah Alper is open about his setbacks. His previous company, which aimed to sell giftware from Israel to born-again Christians, “was a total and absolute failure,” he admits. But things change fast for entrepreneurs and just 6 months after he closed that business, he launched Noah’s New York Bagels and “had a tiger by the tail.”

In this program, you’ll see how he did it by being a mensch, a Yiddish word which means “a person of integrity.”

Business Tips via Mixergy, home of the ambitious upstart!

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About Noah Alper

Noah Alper is the founder of Noah’s New York Bagels, which he sold for $100 million 6 1/2 years after launching it. He is also the founder of six other ventures, including the grocery store company, Bread & Circus, once the Northeast’s largest natural foods chain and now part of Whole Foods Market. Today he consults in areas of entrepreneurship, strategic management, executive coaching and business planning.

He is also the author of Business Mensch, a book about lessons from his business experiences.

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And so…we’ve reached the final interview in our current business planning interview series. It’s been a fascinating series filled with amazing insights on entrepreneurship from really talented and successful entrepreneurs; if you missed any of the interviews, check them out here. The next series of interviews will start in a few weeks, so check back regularly. Or better yet, subscribe to our RSS feed or email updates.

In Part Six of Fireside Chats with Fiery Entrepreneurs™, we welcome Banu Khurana, serial entrepreneur and owner of Toronto-based 3 Sprouts, a highly differentiated children’s accessories design and wholesale company with eco-friendly product lines that include hooded towels, canvas storage bins, placemats and art smocks. While Banu was an MBA student at the Joseph L. Rotman School of Management at the University of Toronto in 2001, she was also building the foundation of Khurana Inc., a luxury lingerie label she co-founded in 1998. After this successful stint in the fashion business that included clients such as Bergdorf Goodman and Holt Renfrew, Banu co-founded 3 Sprouts in 2007.  Read on for Banu’s insightful thoughts on business planning, along with her story about how 3 Sprouts tackled some serious challenges during the ongoing recession.

Faheem Moosa: Banu, thanks for taking the time to join us for the ‘Fireside Chats…’ interview series. In your opinion, what are the best ways an entrepreneur can research and understand his or her market?

Banu Khurana: One of the ways that has really worked for us is attending trade fairs. You get to see a lot of brands all in one place, so you can get a sense of what the marketplace looks like, who the big players are and perhaps maybe where some openings exist. We visited trade fairs before we entered the market in order to learn about the market. Now since we’re in the market, we exhibit regularly at them. They’re great opportunities to learn more about what’s new in the industry when all of the players get together every few months.

We attend two specific types of trade fairs – trade fairs that are specific to kids’ products, or gift shows which are more general where you have vendors who sell all kinds of gift products, whether they be kids or pet products, home accessories, stationary – all kinds of stuff that you would find in specialty stores. One that’s very good is the New York International Gift fair, a very big trade fair for our industry. We attend another one in New York called the Children’s Club Show. It’s a bit narrower in focus, but still if you have a baby or children’s store you’ll be going there at some point during the year.

FM: When there are several growth opportunities ahead of you, what criteria do you use to analyze those opportunities and place your bets?

BK: For us, the opportunities mostly pertain to new product introductions. When we’re thinking of introducing a new product, we look at whether or not anyone else is dealing in the product category. How big are these players, how much can the product expand our business? The other growth for us includes increasing the number of distribution outlets we can reach. And the most successful route to that in the U.S has been through trade shows. In Canada, it’s through sales representatives. So then it’s a matter of choosing the right show or the right sales rep. And sometimes that takes time because you don’t know until you do it or work with them. Sometimes it’s not a matter of sitting here and imagining things. You kind of have to get in there and see for yourself what works and what doesn’t. There are several shows that are advertised very well but there really is no traffic coming through them. So there’s no possibility of increasing the number of outlets you sell to through those shows. You get better with it through experience, not just because you have an extra sense for it, but because you’ve just done it, so you know it’s not worthwhile.

FM: Do you think it important for young, entrepreneurial companies to have a well-defined competitive position, target market and value proposition? Why?

BK: Yes. Well-defined, but flexible too because as you go along, things can change. But it definitely helps to define your strategy in the beginning because it keeps you focused. Our idea for our line is that we always wanted to make children’s products that were eco-friendly, whether we use organic cotton or eco-friendly plastics, non-toxic, etc – that’s how we are positioned in the market. We’ve always wanted to provide a green product but at a good price. That being our value proposition since so many green products tend to be so much more expensive than non-eco products. That’s something that stayed with us from the beginning. But once in a while you have to alter some other things, – target market for example – because we were too narrow initially. You can have a well-defined target market but you don’t want to get rigid with it, because the marketplace can change very quickly too. For example, initially we were looking at just parents as our target market. We figured that we were actually very good at packaging our product with the extras that come with it (how they looked), so there was actually a gift customer you could go after – a customer that’s not necessarily a parent but a grandparent, aunt, uncle, etc. who is looking to buy a gift for a baby. So we expanded our target in that sense, in the way we packaged it. Initially we were very parent-focused and included a lot of like practical and safety information in the packaging. Turned out we weren’t really great at that sort of thing. We had it covered but it wasn’t our strength. Our strength lay more in making the product look pretty and keeping it simple. That way we could expand who could buy it – a parent and so could a gift-giver.

FM: What is your philosophy with regard to raising awareness about your company? How do you recommend entrepreneurs approach and plan this task?

BK: We had a lingerie line in the past where we were really all about using free press to raise awareness about that brand. We had a PR strategy that helped us get into the fashion magazines, celebrity magazines, etc. The same applies to children’s products too. However, we have less opportunities now, especially with print magazines because there aren’t that many specific to children. So, our focus has shifted to using blogs to raise awareness. Lots of mothers are tuning in to see what certain blogs are saying about certain parents, and that has really helped us raise our brand’s awareness. There’s a blog called Celebrity Baby blog in which they have new pictures every day of various celebrities and their children and what they wear and what they like – they do product reviews. So when we had a product review on that blog it was very good for us, we got a lot of interest from retailers and customers alike. In the children’s category, it definitely helps being connected to the blogs and somehow get traffic to your website. Because in this category, people can go to your website if they’re a retailer, see it and feel comfortable ordering – they don’t even have to see your product at a trade show. In women’s wear it’s different because there’s sizing issues, price is so much more so no one really does that – they don’t place wholesale orders based just on browsing your website.

One thing that we haven’t gotten into yet is social networking – we’re probably the last dinosaur to not do it. Personally, I’m not really convinced yet – and that could be some famous last words – but I wish someone could explain it to me. You hear people say that your customers are on social networking sites and so should you, but I’m not necessarily sure that my customers would want to hear me tweet about some nonsensical 140 character messages, which is what I often find a lot of brands do. We’ll have to wait and see on that – that’s something that we’re looking into.

FM: What are the key success factors for running and growing a profitable children’s accessories design and wholesale company?

BK: In our business, a key factor for success is good inventory management. We design our lines, but most of our stuff is made in China or India. When you order goods, you don’t actually receive it for 120 days, so you have to be good at forecasting, which is one of the most difficult things. Traditionally, buyers would see you at a trade show in the Fall where there would place orders for the Spring. It’s no longer like that. You need to have stock all of the time and replenish their stores. And they want to take it as low as possible and pass on the risk to you. You warehouse all of the inventory and supply them on an as-needed basis. That’s why you have to be good at managing that inventory. You don’t want to have too much because you’ve paid for it up-front, because then you have cash flow issues, and you don’t want to have too little because then you miss out on sales. The most difficult thing for us is that we’re growing and sometimes it’s hard to predict how fast you’ll grow, in this economy especially. Things pick up and then they slow down again and pick up again. There’s a lot of adjusting and we’re new and don’t have a history to work off of. So, there’s a lot of guesswork involved. We try and do that in a way that is seamless to our customers. That’s a really tough challenge.

FM: What do you feel is an entrepreneur’s biggest challenge when it comes to implementing a strategic plan / business plan? How can entrepreneurs be successful at implementation?

BK: When you have a business plan, you have an idea that you will do certain specific things and hopefully the outcome will be this or that. The most difficult thing sometimes can be that conditions keep changing. We started in 2007 and in a way the market started to go south. The ideas we had in 2007 didn’t seem so relevant anymore in 2008 when the economy contracted. I think that’s our biggest challenge. When you formulate a plan, things can change drastically and you have to capture that. Initially when we started our focus had been to sell to the United States, so we had committed ourselves to do a lot of trade shows there. We pursued this strategy, but started noticing in the Fall of 2008 that traffic was really low. It was a huge difference from what was happening 6 months before that. We really had to try and pick up our Canadian business, since we noticed that it was still maintaining itself. So we tried to find sales reps that could service Canada because there aren’t many trade shows in Canada, believe it or not. It turns out now that our Canadian business is doing well (we do an equal amount of business in US and Canada now) and that’s really helped us when the US economy went south.  We hadn’t anticipated going after Canadian business – that was short-sighted on our part. It was based on what we used to do in our last business – lingerie – where 90% of our business was US-based, so we didn’t realize there was a big chunk to be had in Canada. My point is that things change, so you need to constantly review and revise your business plan – that’s the key to implementation.

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Maggie Fox brought forth some essential business planning issues in her recent interview with Springboarders. Here are my top three takeaways:

1. “You need to understand who the competition is and align your value proposition against weaknesses in the competitive offer.”

It’s interesting how SMG has broken down the social media competitive landscape and positioned themselves as a ‘one-stop’ social media shop with end-to-end capabilities. This is a great example of how new companies create new market space, especially during technologically disruptive times. Here’s what SMG has done, based on what Maggie told us:

Whether you’re starting a business or growing one, it helps to break down the competitive landscape in a way that makes it easy to assess the positions of the various market players. If you can do this in your head, there’s no need for a graph. But if you’d like to present your thoughts to others, a graph like this helps. Notice the X and Y axes in this analysis. Maggie has chosen ‘relationship’ and ‘build/creative’ capabilities as the key benefits/value proposition that current market players – PR firms and Ad agencies – offer. In essence, SMG is an amalgamation of these two types of companies, with ’strategic consulting’ services added to the mix. You could argue that SMG is ‘all over the map’ and not focused, since it offers both strategic and tactical services. However, the common thread that binds all of these services is social media. So, in all fairness, SMG’s offering is pretty focused since it is essentially a ‘one-stop shop’ solution to help clients navigate the social web.

A broad view of the competitive landscape also helps when you’re looking for ways to grow your company; an analysis like the one above lays out the terrain clearly. It will be interesting to see which path SMG takes to grow organically. My bet is their growth path largely involves market development rather than product development, given their product offering is already broad. For an exhaustive list of organic growth paths, read my analysis of the Rahim Fazal interview.

2. “You need to have a really good handle on the basics – costs, revenues, profitability across projects, across the organization and across practice groups.”

A young, growing company needs to keep a close eye on its cash flow – that’s critical. For the first one or two years, forget about profitability and concentrate on making sure you have enough cash to survive. However, once you’ve ensured you have a steady flow of cash to keep your business going, turn your attention to maximizing profit. Business is all about maximizing shareholder value and to do that, you need to maximize profit. As Maggie mentioned, keeping constant tabs on how profitable you are across projects, across the organization and/or across practice groups is key to a company’s success. Here’s an example of how to perform a profitability analysis (by product):

An analysis such as the one above will help you identify which products are the most profitable. Notice that in the example above, while Product C constitutes just 6% of your business, it has an individual Operating Profit of 31%. You could never obtain such an insight without analyzing profitability across product groups. There’s a caveat here, however. Don’t make conclusions about which products you should continue to produce solely based on analyzing profitability. You analysis should be holistic – that means you should include insights about the market as well – insights such as growth rates, trends, competition, etc. Only a holistic analysis will help you figure out which products or services are likely to be profitable in the long run.

3. “I think the biggest challenge is that you’re growing so fast that you need to take the time to do the ‘important’ versus the ‘urgent’…this kind of thing is really a deadly trap. I think it’s very important to not get too caught up in the ‘right here, right now’ and to achieve the balance between those two things.”

The classic entrepreneurial trap – the important versus the urgent. To really increase the level of control you have over getting the important tasks done, you need an Action Plan. Believe me, you will save dollars and time if you’ve got a documented plan that states what needs to get done. ‘Getting it done’ matters. The essence of Springboarders’ offering is to help entrepreneurial companies get things done. The way we do this is by first developing your strategy and second, by deconstructing your strategy into prioritized tasks, complete with deadlines, budgets and teams. Here’s an example of what a Springboarders Action Plan looks like:

An Action Plan must be a dynamic document, i.e. you should constantly review the plan and assess what’s been completed. You will often find that the plan needs to be updated in order to reflect changes in your business strategy. An Action Plan also helps your team remain accountable for their assigned tasks, since their names are listed against the tasks. Once you get into the habit of managing the important tasks with an Action Plan, you will find that you are able to bring your business plan to life with ease.

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For Part Five of Fireside Chats with Fiery Entrepreneurs™, our ongoing, six-part interview series about business planning, I am pleased to have spoken with Maggie Fox, Founder and CEO of Social Media Group. Here’s a profile on Maggie from Social Media Group’s website:

Maggie Fox is the founder of Social Media Group, one of the world’s largest independent agencies helping business navigate the new socially engaged Web. Pioneers in their field, Social Media Group has developed social media strategies for some of the best-known brands in Europe and North America, including; Ford Motor Company, SAP Global Marketing, Yamaha Motor, Corbis and Harlequin Publishing. Maggie has been interviewed about social media by The Washington Post, CBC Radio, The Globe and Mail, CTV News, The Toronto Star and Marketing Magazine, among others. She was recently included in Women Who Risk, a listing of influential women who head up Internet-based firms, and is a member of both The Social Media Collective, an invite-only group of “the web’s best thinkers on media, marketing and web 2.0″ and the Enterprise Irregulars and she was also named one of the Top 100 Marketers in the 100th anniversary edition of Marketing Magazine. Maggie is frequently asked to speak to the media and business groups across North America about Web 2.0, and sits on the Advisory Board for SMToday Media, operators of the Social Media Collective and MyVenturePad sites. She also has a seat on the advisory board of Humber College’s Public Relations program.

Faheem Moosa: Maggie, thank you very much for agreeing to participate in the ‘Fireside Chats…’ interview series. In your opinion, what are the best ways an entrepreneur can research and understand his or her market?

Maggie Fox: I think the internet is the start and the finish of all that. I think the very first thing you need to do when you come up with a company concept is to Google it to see if there’s a similar name or concept that already exists. If there’s a new business or new proposition, you should come up with a name that is very descriptive of the space you’re in and test it out. In our case – Social Media Group – I knew that it was the right business to start at the right time because the URL was available – that’s a really good indicator. It’s probably a great time to start your business if a very descriptive URL around that business is available.

As for market research, in our case it was very organic. We identified what the opportunities were and what we felt people needed based on anecdotal information from people who expressed an interest or curiosity about social media and how businesses could use it. So, for us, part of it was situational. Where we were at the time, we were hearing from the market that there were opportunities out there and obviously that prompted broader thinking about how those opportunities could be realized.

FM: When there are several growth opportunities ahead of you, what criteria do you use to analyze those opportunities and place your bets?

MF: If you pursue too many opportunities, you become unfocused and you become a ‘jack of all trades and master of none’. You really have to identify what your strengths are as an organization or individual and really focus on opportunities that play to those strengths. What are you the best at? What can you make most money at? What do you love doing? What can you be the best in the world at? Those are kinds of things that we look at and it’s hard sometimes, because we look and say ‘there’s something we could do there, there’s a huge opportunity here, etc.” But if you go down all of those paths, you just get scrambled. So you really have to focus ultimately on what you love and what you can give back to the world.

FM: Do you think it important for young, entrepreneurial companies to have a well-defined competitive position, target market and value proposition? Why?

MF: Yes, I do. Absolutely – without question – I think a young entrepreneurial company needs to have those things before they have anything else. Those are the first things you need. You need to understand who the competition is and align your value proposition against weaknesses in the competitive offer. That’s exactly what we did. We took a look around and realized there were a lot of Public Relations (PR) companies engaged in social media that didn’t particularly have ‘build’ capabilities, nor did they have marketing sensibilities in terms of ‘creative’. We also identified there were a lot of advertising and marketing agencies that were engaging in social media that didn’t understand the ‘relationship’ aspect of social media the way PR companies did. And additionally, for us there’s a real, identified need for business consulting-type requests around how you define what it is you’re going to be doing – that involved a lot of research and neither of those organizations were good at that at all. So we took a look at all three vectors of competition, bridged all of them and presented an offering that filled all of the holes in all of these traditional models. That was done within the first few months. We took a look at the competition and identified that those things were extremely important to our positioning.

I think you need to have a specific target market in mind but I also think you need to be flexible because you often don’t realize what the opportunity is before you’re in the market. In our case, we initially figured that working with advertising agencies would be great. They had existing relationships, didn’t have the skills and had already identified the budget – so a lot of the leg work and hard work was done. They could bring us in and we could execute and that would be how we would make money. We thought that would be low-hanging fruit. Getting into the market, we realized that it really was not. So it’s fine to have a goal or a path, but you have to be willing to adjust it if you realize that it’s really not working.

FM: What is your philosophy with regard to raising awareness about your company? How do you recommend entrepreneurs approach and plan this task?

MF: It completely depends on what kind of business you’re in. We’re a social media company, so we recognize that using social media to connect with our colleagues to publish information that we feel is of value would spread and therefore awareness of us would be raised organically. We essentially practice what we preach. We have a company blog and a Twitter account, we attend conferences where colleagues gather – all of that is absolutely essential. The other part of it is that if you’re in a vertical where comments might be sought from media, then you should take advantage of that. In Canada, there’s a book called Contacts which journalists use all the time to identify people that could comment on specific topics [Interviewer's note: You may also want to check out Help A Reporter Out, a similar service]. Listing yourself in a book like that is a great idea. Because they’ll look through it, call you and have you quote on a particular issue. You can also do it organically – make connections with reporters, follow up with them and build relationships with them. We get 1-2 pieces of earned media every month without any effort at all. So that kind of creative thinking – positioning yourself as an expert or thought leader in your space – is a wonderful opportunity for you to raise awareness of the company and your credibility. Speaking at conferences is very helpful as well.

FM: What are the key success factors for running and growing a profitable professional services firm/social media agency?

MF: First and foremost, it’s team. You must build a strong, quality team. In our case it involves multiple disciplines. We have people coming from the interactive space, PR, IT and business consulting. So, we have a cross-disciplinary team of individuals who are extremely good at what they do. Also, in an entrepreneurial environment, you have to hire people that are comfortable with ambiguity – with roles that change. You need folks who pitch-in where you need people to pitch-in – that’s hugely important. We’ve had circumstances where we’ve hired people who were eminently qualified to do certain tasks and came at a price tag that was appropriate, only to discover that because they come from a very large, established organization, they just could not cope with the ups and downs and flexibility required in an entrepreneurial environment.  So, you really have to look for people who are up for an adventure. That’s critical – personality and skills. So, assemble the best possible team you can – first and foremost.

When you start to look at business operations, you need to have a really good handle on the basics – costs, revenues, profitability across projects, across the organization and across practice groups. That kind of reporting and insights are absolutely critical to keep a handle on your business. You’ve got to be able to look at a project and know how much money you’re making on it, so that if you don’t make money on it you do not make the same mistake again. We are very focused on profitability and look to improving it all the time. The constant cycle of evaluation and improvement is important for us. In many respects, we’re inventing something new, so keeping a handle on it and making sure we know what we’re doing is hugely important.

The other thing is to build a strong company culture. Entrepreneurial environments are very stressful for the entrepreneurs and for the people that work with them. Things change, there are ups and downs, things are going great and then something happens, and then things are not going so great. And especially when you’re involved in improving and really trying to grow the company into something really stable with a good, solid foundation, it can be painful. So, instilling a really strong culture of fun and enjoyment is really, really important to keep morale up. So that means doing things together, empowering people to work in different ways that allow them to be most productive, doing fun things and communicating regularly so that they’re not kept in the dark – all of these things are really important to keeping the team with you.

A quality product is the outcome of all of the things I’ve mentioned so far.

FM: What do you feel is an entrepreneur’s biggest challenge when it comes to implementing a strategic plan / business plan? How can entrepreneurs be successful at implementation?

MF: I think the biggest challenge – especially in a company like ours that is bootstrapped – is that you’re growing so fast that you need to take the time to do the important versus the urgent. We often find that we do things that are very urgent for the business – things that need to be done today – billing, cash flow, client work etc. It definitely needs to happen now, so other things that are more structural, foundational, and strategic get shoved off to the side. I had a conversation about this with one of our directors the other day and mentioned that this kind of thing is really a deadly trap. If you’re always in ‘response, response, response’ mode, you’ll accomplish almost nothing. So I think the biggest challenge in an entrepreneurial environment around implementing business plans is that you don’t often have the time to take a few steps back and say, ‘Ok we’re going to do this foundational, structural stuff that is critical to the survival of our business and the ability of our business to scale’; I think it’s very important to not get too caught up in the ‘right here, right now’ and to achieve the balance between those two things. I would say that for the first year and a half of our existence, we really didn’t focus on the implementation of the necessary business processes and the kinds of things you find in a business plan. We found ourselves running into scale problems until we really started to focus on the foundational and strategic tasks.

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For an analysis of this interview, click here.

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Bas Van Berkel and his business partners look like they have their hands full and are enjoying the challenge of building StormFisher into a great company. Click here if you missed my interview with Bas last week. What impresses me most about Bas is his ’straight-talk’ and humility, both of which are terrific leadership traits. Many of the takeaways from this interview revolve around leadership. Here are my top three:

1. “I can describe our competitive position, value proposition and target market in 60 seconds.”

I’ve never thought about applying Bas’ 60-second rule for business strategy – until now (that’s why I love doing these interviews – I learn a great deal every time!). A company’s target market, value proposition and competitive position form the core elements of its business strategy. The target market constitutes a well-defined segment of the market (with similar traits and needs) that your company serves or would like to serve. Conceptually, it’s easy to understand, but it can sometimes be hard to define when there are too many variables associated with that market. A ‘value proposition’ is essentially composed of key benefits – both functional and emotional – that your product or service offers customers. A competitive position (or positioning) comes down to defining how you will be different from competitors and win in the marketplace.

As you can tell, all of this can get pretty complicated. Especially given the fluid nature of business strategy. Your strategy will change from time to time, depending on both external (market) and internal (company) factors. Using the 60-second rule may have two key benefits: 1. It forces you to keep your strategy simple, and 2. It helps you see the forest for the trees.

2. “Making sure that you know your stuff better than anybody else. Don’t bullshit people. This is as much about values as business.”

I’m glad Bas brought up Values. I am a big, big believer in the fact that businesses should take their Values seriously and encourage everyone in the company to live by them. Lots of businesses have a set of Values framed and hung up on a wall, but rarely practice living those values. The key value (pun intended) that Values brings is that they help define a company’s culture. What is culture? According to Ed Clark, President & CEO, TD Bank Financial Group, culture is what people in your company do when no one’s looking. Quite powerful when you think about it.

Take a look at the Values of two great organizations that are well-known for their unique cultures. It’s interesting to note that while one of these companies – Procter & Gamble – is almost 200 years old and is a global leader in consumer goods, the other – Zappos.com – is only a decade old and is a poster-child of the new economy.

Procter & Gamble: 1. Integrity 2. Leadership 3. Ownership 4. Passion for Winning 5. Trust

Zappos.com: 1. Deliver WOW through service 2. Embrace and Drive Change 3. Create Fun and a little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships with Communication 7. Build a Positive Team and Family Spirit 8. Do More with Less 9. Be Passionate and Determined 10. Be Humble

3. “It’s always important to balance the promises you make to an investor in an early stage versus what the reality is of the execution. Because, the one thing you know from the start is that your initial business plan is not going to work out as planned – that’s the only thing you know.”

The only thing I’d like to say here is this: Don’t fret when your new business plan doesn’t pan out – it usually never does. The key is to develop an action-oriented, flexible business plan that changes with time. For more information on how this is done, visit Springboarders’ website.

In Part Four of Fireside Chats with Fiery Entrepreneurs™, our ongoing, six-part series of business planning-related interviews, we talk to Bas Van Berkel, Co-founder and President of StormFisher Biogas, a renewable energy company in Toronto that builds, owns and operates biogas plants across North America. Working with the food processing and agricultural industries, StormFisher processes organic by-products and turns them into natural gas and electricity.

Bas co-founded StormFisher Biogas along with Christopher Guillon and Ryan Little, whom he met while pursuing his MBA at the Richard Ivey School of Business. Bas and his team recently negotiated a strategic partnership agreement with Denham Capital Management, a Boston-based private equity firm, to develop a $350 million portfolio of biogas projects. The relationship with Denham makes StormFisher one of the most well-funded biogas companies in the world. For more on StormFisher, click here.

Faheem Moosa: Bas, thanks very much for your time – great to have you here. In your opinion, what are the best ways an entrepreneur can research and understand his or her market?

Bas Van Berkel: Network and make sure you talk with people who are doing business in your market. Most people are willing to have a chat if you’re polite and will provide you with a ton of information which you can’t always take on face value, but which are the real data points that will truly tell you a lot about the market. To back up our business plan, we got a lot of information online – tons of information online. We did weeks and weeks and weeks of research online. There’s so much available, it’s amazing.

FM: When there are several growth opportunities ahead of you, what criteria do you use to analyze those opportunities and place your bets?

BVB: Depends a little bit on what stage you are in the business. In the beginning it’s about ‘quick wins’ to help create credibility in the market. These might not be your financial ‘big bang’ but you’ve got to first create credibility. But later on, when you’re an established player, you need to forgo the small opportunities and look for the big ones. At that time, it’s about allocation of resources. You have a limited amount of people, limited amount of time in the day and so you have to focus on the big opportunities. In the beginning, when we started, we looked at small biogas plants. Along the way we discarded a whole bunch of small opportunities, but that’s just because we were moving on to a new stage in the company. You should not be afraid of throwing something away that you’ve already spent a lot of time and money on – it’s a sunk cost. I noticed with myself that in the past, I really wanted to hold on to the smaller opportunities because we already spent a lot of time and effort on them and wanted to pursue them. But the logical choice, in the end, is not to. We have a rule at the company that every few months the management team deconstructs the entire business strategy and everything we have been doing is open to question. It can be surprisingly hard to objectively challenge conclusions you hold so dear but it’s the best way to make sure you’re not being complacent.

All what I’ve spoken about till now relates to looking at opportunities in a general sense. Looking at this through the lens of StormFisher, we build projects – that’s our business. So, if we look at growth opportunities in terms of new projects, we look at a combination of size, profitability, Internal Rate of Return (IRR) and simplicity of execution. Just to expand the ‘execution’ part, for example, in our business arguably the biggest opportunities are in California, but it’s so hard to execute that we have not yet made the choice to go to California.

FM: Do you think it important for young companies to have a well-defined competitive position, target market and value proposition? Why?

BVB: Absolutely. For one thing, it’s what the investment community demands. We’ve been very, very focused on these three things that you mentioned. We play in three segments – we take organic by-products and we sell both electricity and fertilizer. Those are our three revenue streams, and within those industries we have very specific target markets. Electricity – sold under long-term contracts to creditworthy parties, a very targeted position. Fertilizer – we sell it as an input to the fertilizer industry.  We do not do sales distribution, so again it’s a very targeted position.

So yes, I think it’s very important. If anything, this is where you make the difference with investors. And regardless of that, this is how you win as a company, I believe. I can describe our competitive position, value proposition and target market in 60 seconds. What you should be careful about is not to write big reports on them. Have a few slides that help describe them, after which you can explain it to the entire room – that’s the key. If it needs a change, then it needs a change – so change it quickly.

FM: What is your philosophy with regard to raising awareness about your company? How do you recommend entrepreneurs approach and plan this task?

BVB: One of the strengths of our company is raising awareness. This has been very helpful to us because you become credible in the marketplace very quickly if the awareness is positive. By raising awareness, people start to call you instead of you having to call them. For the first year and a half, we had to push hard to get our name out there. Now people come to us for biogas-related opportunities. So, raising awareness is extremely important.

To raise awareness, in our company’s case, we recognized that there were lots of angles about our business that are interesting to the public and the business community. We built a public relations campaign on that interest that has been in pretty high gear for about two years now. One of our co-founders takes leadership in this area and makes sure we are always out there with public speaking, earned media, press releases and so on.

FM: What are the key success factors for running and growing a Renewable Energy company?

BVB: Making sure that you know your stuff better than anybody else. Don’t bullshit people. This is as much about values as business. We are recognized as a group of young guys who really want to do this because sure, they want to make money but they also want to do something good for the environment. We’re tough negotiators, but we don’t lie. We’re open people – maybe a little bit too open once in a while. But that’s how we are and that’s how we want to do business. So, that’s a big factor for success.

Working constructively with your stakeholders is another key success factor. We are in a business where we just cannot fool around. This is a serious manufacturing business and you’ve got to follow the rules – there are lots of regulations. Do not believe that just because you are a strong player or own a certain niche that you can bully people. Negotiate tough and professionally, but do it in a constructive way with everybody. There will be some stakeholders today that do not seem powerful in the whole equation, but tomorrow they might be. If you are a bully, you’re going to lose out in the future.

Finally, it boils down to the team. We focus a lot on building our team here and have some high quality people in our company. I know that publicly it might sometimes come across that it’s just the three of us (Christopher Guillon, Ryan Little and myself). But, to give you a flavour of the rest of our management team, the leader of our VP of Development (Brandon Moffatt) used to be the leader of the biogas business unit of a major firm where he built farm-based biogas plants all over North America. Our VP of Construction (Mark Stanski) has over 25 years of construction experience, building $10-25 million projects throughout the world. Our Legal Counsel (Ann Hughes) used to be the EVP and Corporate Secretary of Canadian Hydro Developers, the biggest renewable energy developer in the country. And our Operations Manager (Ashwani Kumar) ran a biogas plant for 12 years. So we added some really, really experienced people to the team. And the younger people we hired were selected based on intelligence and attitude, because in the end, everybody has to learn about biogas since it’s fairly new in North America.

FM: What do you feel is an entrepreneur’s biggest challenge when it comes to implementing a strategic plan / business plan? How can entrepreneurs be successful at implementation?

BVB: Depends a little bit on whether you need a lot of investment. If you need a lot of money from the outside, it’s always important to balance the promises you make to an investor in an early stage versus what the reality is of the execution. Because, the one thing you know from the start is that your initial business plan is not going to work out as planned – that’s the only thing you know. So you need to balance or manage the expectations of investors versus what’s happening in the real world. And that’s a challenge. I would say you should focus on getting results, or qualified successes. Investors will then be forgiving and say ‘Okay, this is a qualified success. It’s not exactly what we expected, but it doesn’t matter, it’s a success nonetheless’.

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For an analysis of this interview, click here.

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I don’t know about you, but the interview with David Kincaid, CEO of LEVEL5 Strategic Brand Advisors, simply blew me away. Almost every sentence makes you stop and think. This is a great interview rich with insights about entrepreneurship and business planning. If you didn’t get a chance to read the interview, click here. Although I can go on and on about David’s various insights, here are the top three that resonated the most with me:

1. “Anybody can have an idea, but what you need to have as an entrepreneur is belief.”

I remember watching an interview of Steve Jobs, CEO of Apple, on YouTube a couple of years ago. The interviewer asked him what he thinks it takes for someone to succeed in business. Jobs’ response went something like this: “The first thing you need is passion. When bad times fall upon you (and trust me – there will be bad times), any sane person will feel like quitting. However, if you’re passionate about your business, then that will give you the strength to be persistent.”

I felt David Kincaid’s quote about ‘belief’ speaks, although indirectly, to the same point. Ideas are a dime a dozen and it’s easy to come up with them, but what’s the basis for your belief in that idea? Do you really believe your business idea has merit, based on what you know about the marketplace? Similar to Jobs’ views on passion, I think an entrepreneur’s belief (that her idea is viable as a business) will save the day if things things get rough.

My basis for starting Springboarders is that I believe owners and directors of entrepreneurial companies are too busy managing day-to-day activities to thoroughly plan their businesses. Furthermore, my belief is that these owners and directors don’t just need business plans, but they need an easy way to implement their plans. I know that business plans are usually shelved once they are written because they aren’t living, breathing documents. However, I believe that when business plans are developed as action-oriented tools, they can help entrepreneurs understand their market better and lead to more effective execution. This is my belief, and is what keeps me going.

2. “In year one, if you can’t break-even, then you don’t have a proper business model.”

In capital-intensive industries – biotechnolgoy, for instance – it’s virtually impossible to break-even in the first year. However, in professional services, it is possible if you have the right business model. Start-up costs are relatively low for professional services firms, so as long as you enter the market with a solid value proposition, the right price point, low fixed costs and an aggressive sales plan, you can break-even in the first year.

There are tons of resources available on the internet to help you calculate your break-even point, but below is a gist of how it’s done. Your break-even analysis will help you determine the quantity of output that results in zero income before interest and taxes. If you are able to break-even in the first year, then you know your professional services firm is on the right track.

To determine your firm’s break-even point, you need to analyze your cost structure and projected sales. It’s important to classify your costs as either fixed or variable. While fixed costs are expenses that do not change in proportion to the volume of business, variable costs are expenses that do. Here’s an example of what fixed and variable costs look like in a professional services firm (Note: The lists are not exhaustive):

Once you have calculated your total fixed and variable costs, determine your projected level of sales. Your break-even level of sales is then calculated using this formula:

Break-even level of sales = Total fixed costs / [1 - (Total variable costs/projected sales)]

Let’s say you project to achieve sales worth $150,000 in the first year, with total fixed costs at $40,000 and variable costs at $70,000. Your break-even level of sales is as follows:

Break-even sales = 40,000 / [1 - (70,000 / 150,000)] = $75,472

To be realistic, have three sets of sales projections (best-case, worst-case and most-likely) and determine your break-even level of sales for each set.

3. “You may be the founder, but you don’t have all the answers…Once you know what the success factors are and what you need to run the company, find people who are better at doing it than you are.”

Steve Jobs, in the interview I mentioned above, said the other thing you need to succeed in business is “knowing how to hire the right people”. David echoes the same point. Although there are no right answers in business, it seems like there are universal truths about business that experienced leaders seem to know innately.

Obviously, as a business owner, you can’t do everything yourself – you need to build a team. I worked at LEVEL5 for a year or so and have seen the team in action. The LEVEL5 management team comprises former C-level executives that have led companies like Labatt Breweries, Adidas Canada and Second Cup. Each member of the team has a unique ability, whether sales, operations or other functions. As a high-growth company LEVEL5 sure faces several challenges, but those challenges are met with aplomb due to the team’s expertise and experience. As a former insider I can confidently say that around 90% of the time, the operation rolls along smoothly – that’s a pretty high percentage considering the challenges a high-growth company can encounter. My point is this: if you find your business isn’t running as smoothly as it could be running, then maybe it’s time you start thinking about building a better team.

In Part Three of our six-part interview series on business planning, Fireside Chats with Fiery Entrepreneurs™, we are lucky to have a legendary Canadian marketer in our midst. David Kincaid is President & CEO of LEVEL5, one of Canada’s premier strategic brand advisory firms, and has been responsible for the launch of several international products and media innovations throughout his storied career. As the Chief Marketing Officer for Corus Entertainment, one of Canada’s most successful integrated media and entertainment companies, he was responsible for revitalizing the entire brand portfolio. He also spearheaded the extremely successful Labatt “Out of the Blue” campaign, which he developed as Senior Vice President of Marketing and Strategic Planning for Labatt Breweries. David is highly acclaimed and has received accolades for over 25 award-winning advertising and promotional campaigns.

This is a fascinating interview in which David sheds light on some fundamental questions aspiring entrepreneurs should ask themselves before they plunge into the world of entrepreneurship and start to write a business plan – especially those aspiring entrepreneurs that wish to start a business after spending several years in the corporate world. Read on.

Faheem Moosa: Dave, thanks for so graciously accepting my request for an interview – great to have you here. In your opinion, what are the best ways an entrepreneur can research and understand his or her market?

David Kincaid: Before you worry about researching and understanding, you’ve really got to understand what it is you are passionate about and what it is you believe you can bring to the market. To understand somebody’s need without understanding what value you can bring first, is a little bit like asking, ‘Do you believe in religion?’ It’s such a broad topic. Once you understand what the focus to your passion, your capabilities and your value proposition is, you will then know what kind of clients (you need to target), keeping those parameters in mind. At LEVEL5, the parameter is brand – we want to research and understand our client’s brand. When I went out to do my research to develop a business plan to launch LEVEL5 I knew the subject matter I was researching and understanding, but it was driven by something that I had a passion for.

Anybody can have an idea, but what you need to have as an entrepreneur is belief. So, you have to test the market around the hypothesis that your belief creates. My belief was that people had lost track of looking at their brands as assets – it had become a Marcom effort. So I went out and did my initial research and understanding around that. I could do it credibly because I was passionate about it and because I had a background in it. I went out and spoke with Presidents, CEOs and Board members of companies who demonstrated their ability to build their business through their brand. I also talked to start-ups – companies that had the goal of creating a brand but that were starting from nothing. I leveraged my network more than I did desktop research. Because this was something I was passionate about and had a background in, most people were receptive to me bouncing the hypothesis off of them.

FM: When there are several growth opportunities ahead of you, what criteria do you use to analyze those opportunities and place your bets?

DK: Three of them. One, is it rooted in a meaningful consumer insight? Two, does it truly deliver on an unmet need as a result of that insight? And three, is it truly a business? So, there are all kinds of directions I could have taken LEVEL5 in, but the model that I created involved organizing a small group of senior people with practical experience as owner-operators or CEOs of brand-driven organizations. That’s the choice I made. I could’ve developed it across a whole bunch of different models. Again, you could have the greatest idea, one that is rooted in a consumer insight, delivers on an unmet need and is wonderful, inspiring and unique. But is it really a business? Is it sustainable? Can you scale it? And, do you have the competency, reputation or credibility to participate in that area?

FM: Do you think it important for young, entrepreneurial companies to have a well-defined competitive position, target market and value proposition? Why?

DK: Yes. If not, where do you target? How do you prioritize? Where do you focus your efforts? Whose needs and understanding are you trying to develop an appreciation for? You have to position against a specific target audience with something that’s unique and it’s got to bring value to them. That’s what I mean, is it a great idea or is it a business? And you should be able to write a business plan around it. If it is a business, then show me the plan. I wrote a very detailed 3-year business plan to get LEVEL5 up and running. I took it to the bank – the bank manager said it was more detailed that the plans he gets from companies that are 25 years old when they’re applying for credit. The plan was approved on the spot. I laid out exactly what I was trying to do, for whom, and gave them some idea about some responsible level of investment and spending and what my revenue expectations were.

So, if you don’t position, don’t have a target and don’t have a value proposition, how can you write a business plan?

FM: What is your philosophy with regard to raising awareness about your company? How do you recommend entrepreneurs approach and plan this task?

DK: For an entrepreneur with a brand new proposition in the market, raise what I call responsible awareness. Often when people leave the corporate world to start up their own thing, they go out and build awareness about how great they are. But they have nothing to prove – no demonstrable results. I don’t care how great you were as the CMO of Royal Bank, you’re now running a new business. You actually have to re-earn your stripes. So, raising awareness is more based on doing it responsibly, through people who believe in you and will endorse you because they’ve worked closely with you. And it’s not about going out and telling the world on your website or PR that ‘we can do this, or we can do that’. That’s great, but what have you got to prove? What have you got to show for that? So, build awareness but do it responsibly. Always leverage your network. Word of mouth is your single largest, most powerful yet riskiest form of media to raise awareness. What are you doing to promote that?

FM: What are the key success factors for running and growing a profitable professional services firm?

DK: Number one is differentiation. The world doesn’t need another advertising agency. So, what’s your unique selling proposition and how does that come to life through the value proposition? Number two, as I said earlier, is that it’s truly a business and not just an idea. People can pursue ideas and go broke. Again, it’s a business if it addresses an unmet need, if you can credibly deliver it and that it is sustainable and scalable. And the third one pertains to your business model. In year one, if you can’t break even, then you don’t have a proper business model. Because, once you start that spiral – ‘Oh, we’ll cover the losses next year’ – you are now working from a position of fear, not confidence.

FM: What do you feel is an entrepreneur’s biggest challenge when it comes to implementing a strategic plan / business plan? How can entrepreneurs be successful at implementation?

DK: I think the biggest challenge most entrepreneurs have is confidence. And again, a lot of it is because they pursue an idea, not a belief. Because the idea sounds good, they get it out there, they try to make a business out of it and it fails. The numbers aren’t coming in, and the immediate conclusion when you’re managing an idea versus a business, is ‘I guess the idea wasn’t very good, let’s pull the plug, because it’s not making any money.’ Secondly, as an entrepreneur, you’re building an asset. You should be worried about the balance sheet, not the P&L. That requires long-term perspective and it requires persistence. Underscoring both of those is confidence. So, the biggest challenge is to keep that confidence and not let the fear-factor come in and rule you.

The best way to be successful at implementation? Surround yourself with people that are better than you – diversity of opinion, diversity of backgrounds. And put on big ears. You may be the founder, but you don’t have all the answers. I operated the company on my own for five years, but I didn’t operate it as well as Ian Madell and Hua Yu do today. I have an ongoing intellectual curiosity and capacity, but I’m not as diligent, rigorous and thorough in poring over periodicals and articles and newspapers as Matt Kelly is. I think I’ve got a pretty good business development capability and a pretty good network, but it’s half that of Bruce Elliot and Tom Wright. So, once you know what the success factors are and what you need to run the company, find people who are better at doing it than you are.

For an analysis of this interview, click here.

If you missed the interview with Rahim Fazal, CEO of Involver, you can read it here. Rahim is intelligent and articulate, with a capacity for expert business planning. I think the interview drips with rich insights – it reads like one of those books in which you discover or perceive something new every time you read it. Here are my key takeaways from the interview:

1. ‘I think it’s really, really important to understand what the problem (in the marketplace) is as well as you possibly can’.
I thought this was Rahim’s central message and it is a good one. It’s pretty basic, but it’s amazing how many companies forget this principle, especially when in ‘expansion’ mode. Unless there’s a problem in the marketplace, you (or your company) have no business being in it. I would go so far as to say that this may be one of the biggest reasons ‘me-too’ businesses fail so often. These companies aren’t solving problems (they may not even be aware about problems in the market) but just want to run businesses in a given market because they see others succeeding in that market. There are several examples of how businesses both start off and continue to succeed by solving fundamental market problems; off the top of my head, here are some I can think of:

• The incandescent light bulb – Thomas Edison is believed to have spent years looking for a viable solution to a huge problem of his day – an effective and scalable source of light – which resulted in his invention of the incandescent light bulb
• Subway (fast food franchise) – A lack of healthy fast food was and still is a problem; Subway is one of the popular and successful solutions to this problem
• Robeez Footwear – Sandra Wilson started this hugely successful childrens’ footwear company when she was unable to find shoes that would stay on her son’s feet properly

2. ‘When we started this company, we started with the problem of getting brand dollars into Facebook…. (The target) segment included advertising agencies that wanted to market on Facebook using video. Now as we’ve grown and solved that problem, we’ve expanded the target market.’

I thought it might be worth pointing out a classic growth path for most entrepreneurial companies: concentrate on a narrow niche; become very good at it, ‘own’ the niche and make money; then expand into other markets or industry segments. It only make sense to choose to play in a narrow niche, given a small company’s limited resources. But there are tons of small companies out there who try to do ‘everything’ and be all things to all people. In most cases, this is a flawed strategic choice that not only leads to a lack of identity in the marketplace, but also demotivates employees.

Involver’s path to growth was to target new segments in the market. But there are several other paths to growth as well. This might be a good opportunity for me to put my business school hat on and list the various options for organic growth (If I’ve missed out anything, please be sure to leave a comment):

1. Growth in existing product markets
   • Increase market share
   • Increase product usage
     • Frequency
     • Quantity
     • New applications
2. Product development
   • Add product features
   • Develop new generation product
   • Develop new products for the same market
3. Market development
   • Expand geographically
   • Target new segments
4. Diversification – New products, new markets

When planning for growth, it is vital that companies assess their options and choose a path that aligns with their vision and business objectives. It is also important to understand the overall return on investment (ROI) that a strategic choice would lead to. Estimating three fundamental measures - Return on Equity, Return on Assets and Return on Net Assets – is a good place to start.

3. ‘The key thing to remember is this: launching and running a business is a very iterative process and you need to really believe in that and execute around that.’

In my analysis of the Mike McDerment interview, I had touched upon this very point. However, I put this quote up in order to expand on another related point: iterations not only allow you to slightly tweak your business plan, but may also lead to radical changes such as fundamental shifts in your business model or business itself. Think of the insanely successful businesses that started off as something completely different. Dell Computer went through several iterations (in the early 90’s, it tried selling its products through warehouse clubs and superstores) before reverting back to its innovative direct-to-customer business model. Flickr, the photo sharing site, was originally intended to be a multi-player online video game. If their leaders had persisted with their original business plans, their success might not have seen the light of day.

It’s time for Part Two of Fireside Chats with Fiery Entrepreneurs™, an exclusive, six-part series of candid, one-on-one conversations with some tremendously talented and successful entrepreneurs from a variety of different industries. The objective of this series of chats is to allow you to get a glimpse into how these entrepreneurs approach business planning. If you missed Part One of this series with Michael McDerment, CEO of FreshBooks, you can check it out here.

This week, it is my pleasure to welcome Rahim Fazal, Co-founder & CEO of the San Francisco-based Involver, a company that develops a suite of web applications that help brands market on Facebook. Don’t let the length of this interview put you off. Rahim offers several terrific insights that I assure you will help you in your own business planning efforts. Here’s Rahim’ bio from Involver’s website:

Rahim Fazal is a three-time entrepreneur. While still in high school, Rahim co-founded a web-hosting company and negotiated its sale for $1.5 million while taking his Senior Year final exams. He then started a web services platform business and eventually took it public, becoming one of the youngest directors ever of a publicly traded company in the United States.

Rahim completed his MBA at the Richard Ivey School of Business, the top ranked business school in Canada. In recognition of his prior achievements, he was the youngest student in the school’s 80-year history to be accepted without a prerequisite undergraduate degree.

In September 2008, Rahim was named one of America’s “Top 30 Entrepreneurs Under 30″ by Inc. Magazine.

Faheem Moosa: Rahim, thanks for taking the time to join me for the ‘Fireside Chats…’ series. In your opinion, what’s the best way an entrepreneur can research and understand his or her market?

Rahim Fazal: There are a number of different things you can do, but I’ll focus on a couple of them. I think it’s important, before you do anything, to really try and understand what the existing conversation is like in the particular market you’re looking at. So, for example, if I take something like advertising in video games, before I do anything, I would try to understand what people are talking about. What are the problems in that market? What are some of the proposed solutions? Which companies are trying to solve those problems? What types of customers are buying? I think that what we’re finding now is that in each industry there are at least a couple of thought leaders. Thinking about this tactically, identifying who those people are is as simple as going on Google or a blog search engine like Technorati and looking for certain specific keywords to see who is actively leading and participating in the conversation.

The other thing that’s really become obviously more and more popular is Twitter, where you can search for specific keywords and see which people have the most followers. That’s a good measure of popularity and influence. Oftentimes you may see that there’s an overlap between the influential bloggers and the influential people on Twitter.

Using those channels you should be able to put together a list of who the top 3 or 5 thought leaders are in this space – start there and try to read as much as you possibly can and try to tease out what the major themes or pieces of conversation are.

Once you accomplish all of this, at least you will be conversational about the market you’re interested in. You can then reach out to those 3-5 people you’ve identified and really try to dig a little deeper by meeting with these folks or interviewing them. Now you’re really getting into a conversation yourself, and I think the best way of doing that is by meeting people one-on-one and really trying to dig into some of the things you were able to pull out during your research phase. At least then you’ll be intelligent enough (after you’ve done research) to engage in a conversation.

The third one involves identifying the companies that are already in this space – which you would have done through your research and conversations with the thought leaders – and going to their websites, looking at the media they are publishing, videos on YouTube, interviews on blogs or podcasts, etc. Now you’re getting a bit deeper not only into the specific problems, but also into what companies are doing to respond specifically to those problems.

FM: When there are several growth opportunities ahead of you, what criteria do you use to analyze those opportunities and place your bets?

RF: The first way of looking at it is looking internally – what resources, interest and skill-sets do you bring to the table? And among some of these problems or opportunities that you’ve uncovered, do you think that what you bring to the table and your level of interest matches up with any of those opportunities? So, for example, looking broadly at the in-game advertising opportunity – if that’s the problem you’re looking at – there might be a number of solutions. But maybe one particular solution is too technical. Let’s say it’s hardware related. The Xbox is a good example. Xbox is now inserting ads directly into console games, but there’s a pretty sophisticated hardware component to that and developing for the Xbox platform. And that’s probably a little too specific for me personally – I don’t have the skill-set to develop a solution to that problem. If I try to develop the skill-set, it’s a 3-5 year commitment and I just don’t have that level of interest or enthusiasm for trying to solve that problem.

The second criteria would be looking at the opportunity outwardly and answering questions such as, what’s the state of the market, how early is it, how many players are there in the marketplace, how many dollars (are being spent in the market)? And then you try and put the problem and the solution together by saying, “is the problem large enough, or is there a large enough opportunity for some of the solutions I’m thinking of?” So you might be interested in some very specific solutions to an in-game advertising problem, like for example, delivering ads on games on mobile phones. When you then look outwardly at the market, you may find that that market is very early-stage, or you might find that there are three incumbent players there, or you might find that in order to get on to a mobile phone you may need to work with a carrier. And for all those reasons, the opportunity is just not large enough to be interesting to you.

I think once you go through that assessment, you’ll be able to prioritize your opportunities based on these two variables. First, on what you bring to the table and your ability to capture that problem and opportunity. And second, looking outwardly at the external conditions – whether it is a growing, viable and interesting marketplace to be in. I think you could rate across both those dimensions every broad opportunity that you’ve uncovered during your research phase. You’ll then be able to come up with, let’s say, a composite score that will at least help you identify which are the top 2 or 3 opportunities in the market (that you should choose to pursue).

FM: Do you think it important for young, entrepreneurial companies to have a well-defined competitive position, target market and value proposition? Why?

RF: I think the most important thing for any young, entrepreneurial company to really have figured out, is what the problem is in the marketplace. I think the solution will change, undoubtedly. But the problem will likely not change. So, in our (Involver) case, we’ve always been focused on trying to figure out how to get brand dollars into Facebook.  That’s been the problem we’ve focused on for 2 ½ years, but the responses have changed probably two or three different times. I think it’s really, really important to understand what the problem is well as you possibly can. And the best way of doing that – kind of going back to the ‘research’ question – is when you’re talking to people, don’t just talk to people who are experts and service providers but try to talk to customers as well. Who are the people who are buying, who are the people you are solving this problem for? And I think once you really understand the problem, you can then propose what your solutions are to that problem, rank them and start executing them.

Once you start executing your solutions, you’ll begin to really understand what the value proposition and competitive positioning should be, just by virtue of working with customers and trying to sell them a product or service that makes money. I think once you get down to actually generating real dollars, that’s when you really start to understand things like what your value proposition is and what your competitive positioning is. Because if you go to a customer with a product or a service, they’re going to say, “Why should I care? Why do you matter? What makes you different from what I can get elsewhere?”

(On the target market) In order to understand the problem, you really need to understand the market. And in order to understand the market, you need to really understand the customer. If you try to be all things to all people, it will be tough because the scope of the problem you’re trying to solve is too big. So for example, when we started this company, we started with the problem of getting brand dollars into Facebook. The solution we focused on was this: how to get a very small slice of those brand dollars into Facebook for a very specific customer segment. That segment included advertising agencies that wanted to market on Facebook using video. So, that was a very specific segment of the market. Now as we’ve grown and solved that problem, we’ve expanded the target market. We’ve gone from not just advertising agencies, but any type of agency (PR or media agency). We’ve also expanded to the brands directly themselves and to other customer segments that are interested not just in video, but also in any type of media – photos, news, quizzes, etc. But that evolution has happened very systematically over a period of 2 ½ years.

FM: What is your philosophy with regard to raising awareness about your company? How do you recommend entrepreneurs approach and plan this task?

RF: My philosophy with raising awareness about my company is to build a product or service that really delights the customer. Because when you do that, then your customers will tell their friends. So, word-of-mouth is my philosophy, and the way I execute around that is to focus on delighting our customers. Nowadays when Twitter, Facebook, blogs and YouTube are just massive communication channels that anyone can really tap into, if you focus on really making your customers happy, people will find out about you.

FM: What are the key factors for success for running and growing a B2B, web-application company?

RF: I think one fundamental key factor (in the B2B space) is this: really understanding the flow of money. It took us some time to really, really understand how money flowed from the buyer to the seller in the value chain. We had identified that we were interested in selling to advertising agencies, specifically those that were interested in video. But what we didn’t know exactly was, who – what individual – in the agency is doing the ‘buying’, i.e. when we’re thinking about our customer, it’s not the advertising agency, but which group and individual within the agency is responsible for buying? And within that group, what types of people (roles) are actually the decision-makers and what types of people are the implementers? And how are those people getting paid? Where does their budget come from? Their budget comes from their customers – the brands themselves. The advertising agency, which is the customer of Involver, is being paid by the brand on 60 or 90-day terms. And the person who’s ultimately being paid – the decision maker – is the Account Manager, but the implementer is actually somebody else on the account.  So all of these specific details around the flow of cash – where it originates from, through to the various intermediaries, all the way down to us, and then down to the various partners that we have – is critical to understand better than anything else. And it’s important not just because you need to then design your systems to align with this flow of money, but also to ensure the survival of your small company. I think it was an MIT professor who once said that cash was more important than your mother!

The second factor (from a web applications business’ point of view) would be scale. Our customers require that if they have 10,000 people watching a video at one time, there will be absolutely no loss in quality of service. That makes it really key for our company, as an applications platform, to be able to scale. In fact, we just spent the whole weekend transferring our entire infrastructure over from one data centre to Amazon Web Services, which gives you the idea of the importance of being able to scale very well. And this means, for example, if we get 10, 000 new customers tomorrow, we’ll be able to handle it without any problems.

I think the third key factor would be talent. It’s really important to recruit the right type of people you can take and work together as a team from the beginning, i.e. from the early stages of a company all the way to profitability. And this is especially so for a web applications business, where the ramp from the day you start till the day you reach profitability is usually done with the same core team. And it’s usually done in a short period of time, in a year or two, not usually more than that. The types of people you’re going to recruit from the beginning are going to define your culture. So, the first 10 hires are always the most important hires that you make. It doesn’t matter if you’re a small company like ours, or you’re Google. I’ve talked to very early employees at Google who have said that the first 10 hires were absolutely critical in the evolution of culture at a company.

FM: What do you feel is an entrepreneur’s biggest challenge when it comes to implementing a strategic plan / business plan? How can entrepreneurs be successful at implementation?

RF: Err on the side of execution, not planning. When it comes to running a business, particularly when you’re just starting out a business – I think that you really need to look at the amount of time you’re putting into planning and the amount of time you’re putting into execution.  Look at it more like this: spend 1/4 of your time planning and 3/4 of your time executing. When you’re starting a business, your planning cycle is not something that just happens at the early part of your business and then you never come back to it. Getting a business off the ground is a very iterative planning process. So what will happen is, you will really try to do the things that we talked about today, i.e. defining your target market and what the problems are and what the present solutions are, who the players are in this space and what your value proposition is going to be – all those types of things. And then you go out and execute. And then you come back, after 2-3 months of executing and analyze what’s working and what’s not. And then you do another cycle of planning, and follow that with a cycle of execution. So, you do multiple cycles of planning and execution. If you think about it over a 12-month period, you could do 1 month of planning and 3 months of execution, and so on. And I think that is the best way to overcome this challenge of implementing a plan unsuccessfully.

The key thing to remember is this: launching and running a business is a very iterative process and you need to really believe in that and execute around that. So, plan for going through these cycles many, many, many times a year, particularly in the first year of your business.

For an analysis of this interview, click here.