Dr Jeff Cornwall

Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.

Dr Jeff Cornwall - Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.

Look for Veins of Gold in the Market

When first starting a new business, entrepreneurs are not well served when they view themselves as builders or architects.  That is the wrong frame of mind.

When entrepreneurs enter the market with a predetermined view of what they are going to build or design they run the risk of creating a business that does not really fit with what the market wants.

Steve Blank, successful entrepreneur and author, cautions entrepreneurs to learn the difference between the searching stage of launching a new business and the executing stage. Continue reading

When it is Time to Work in Your Business

Here is a sampling of quotes from first-time entrepreneurs that I hear in my office.

“I am trying to get my business card just right – does it look better with a horizontal layout or a vertical one? And do you think this font is OK?”

“We think that after working on it for the past six months that our business plan is just about finished.”

“I’ve been tweaking my logo for the past couple of weeks and I think it is getting close to what I want.”

“This is my latest mission statement – I moved a couple of words around so I hope it sounds better now.” Continue reading

The New School Year Begins

I still look forward to the beginning of classes each fall.  I am excited to see the new groups of faces in each of my classes.  I am excited to try out the new materials and new pedagogical approaches I worked on over the summer.  I still get a few butterflies in my stomach when I first step in the classroom the first day of classes.

This fall I am teaching two undergraduate classes here at Belmont.

Venture Planning is a class that I teach at least one section every semester.  It is the final course that our entrepreneurship majors, minors, and social entrepreneurship majors all have to take before they graduate.

A couple of years ago I made a fundamental shift to make this more of a business modeling class than a traditional business plan class.  Although I continue to refine and tweak the new approach, the results of the change to business modeling have been remarkable.  The final reports in the class are much stronger and we have more students feeling ready to move ahead with their businesses when they graduate.

Even in the face of what seems to most of them as a permanent recession — it has been the economic reality since this group first entered college in 2008 — this group is excited about the future.

My other class this year is somewhat of a new class for me.  I have taught International Entrepreneurship to students studying abroad, but I never have taught it in a classroom on campus before.

We are not just looking at the nuts and bolts of internationalizing an entrepreneurial venture, although that is where we will end up at the end of the term.  Instead, we are beginning looking at some big questions and issues.

Our first topic is quite fundamental, yet profoundly important in today’s world.  Is market capitalism moral?  Does engaging in capitalism corrupt one’s character?

We will then focus on what drives entrepreneurial activity — or in many cases what inhibits it — around the globe.  We will explore the role of culture and public policy issues such as taxation, regulation and property rights.  We will also look at the role of entrepreneurs in shaping culture through how they conduct themselves in their work.

These are incredibly timely issues given the debate not only here in the U.S., but around the globe.

We will be exploring these issues not from a political viewpoint, but at a policy and cultural level examining what empirical research tells us about each of these issues.

I am so glad to be back in the classroom again this fall.  I guess someday this may no longer be the case — I may no longer feel the magic of that first day of classes each year.  I have seen this day come for many a colleague over the years.

And when that day comes I know it will be time to walk away from the whiteboard and hang up the shingle for my bait shop!

Forecasting Revenues Key to Successful Launch

The late, legendary Silicon Valley attorney Craig Johnson used to say, “The leading cause of failure of start-ups is death, and death happens when you run out of money.”

And the leading cause of running out of money in a start-up is poor financial forecasting.

At the core of unrealistic forecasts is the undying optimism of most entrepreneurs.  Their “what could possibly go wrong?” attitude leads to many forecasting disasters.  My father used to say that when he looked at investing in an entrepreneurial venture he would always double the start-up costs and triple the time it takes to get to breakeven.

My rule of thumb is a bit different.  I believe that being overly optimistic leads to entrepreneurs making fatal mistakes in estimating revenues, which is at the heart of most forecasting errors.  So, my approach when reviewing a business is plan is to cut revenue forecasts in half.

Here are the four most common revenue foresting mistakes I see:

  • Assuming an “instant on” button for a new business.  Most business plans I read show significant revenues from the beginning of the business, sometimes even for the very first month that they open their doors.  The reality is that it takes time to build a customer base for any business.  That is why an entrepreneur should have at least six months personal living expenses available to make it through the startup in addition to the money the new business needs.
  • The magic of the hockey stick.  A common pattern in business plans is to show a relatively slow initial start to revenues, and then assume some that unexplained breakthrough will occur that leads to a sudden and dramatic increase in sales.  When you graph this type of revenue forecast it looks just like a hockey stick.  The reality is that such sudden growth is just not that common and usually results from specific actions.
  • Assuming enough sales to make the business model look successful.  In this mistake entrepreneurs forecast their expenses and then they plug in enough revenues to make the business become profitable.  When I press these entrepreneurs, their explanation of revenues is “well, these are the revenues I need to make the business work.”  The truth is that the market will not give you the sales you need, it will only give you the sales you earn through a well-executed business model.
  • The marketing plan tells a different story than revenue forecasts.  The marketing plan should specifically explain what you are going to do to achieve the revenues you forecast.  Why will customers want what you are selling?  Who are these customers?  How are you going to communicate to them about your business?  The marketing plan should explain in words the numbers shown in the revenue forecast.  Most plans just do not make this connection.

To avoid running out of cash before your business model has time to work requires an accurate assessment of how much money you will really need to get the business off the ground. While knowing your costs is important, accurately forecasting your revenues is critical.

It is so sad to see a business model that has real potential fail simply because the entrepreneur was unrealistic about how much money it would take to get to the point of success.