Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, Nothing is Real Until You Start Product Development

I am a big fan of business planning. In fact, I truly believe that the business planning process is invaluable to a successful start-up company, as it provides a path forward for entrepreneurs and their executive teams to follow.  On the other hand, a business plan, the result of the business planning process, is a living document and is out of date the day it is completed.  Why, because the market and landscape are constantly changing. In addition, until you start the development of your technology, product or service offering nothing is real. It is the realities of the actual development that will cause issues and deviations from your original plan. These realities need to be indentified, understood, and managed in order to have a successful start-up company.  In what follows is a short discussion on issues to address once the realities of development begin and start to affect your start-up company.

Verify Your Original Assumptions

One of the first things to do when beginning development of your start-up company’s technology, product or service offering is to verify the original assumptions of your business plan.  Whether it is the development timelines, required product features, functions or capabilities, and any and all associated development costs (e.g., capital equipment, staffing, etc.), you need to spend the time to verify the original assumptions of your business plan.  With the initiation of development new issues will come up that were not originally planned for and these things can deviate substantially from your original business plan.  So, take the time to review and validate and modify as necessary, the original feature requirements as well as the associated development costs and schedule. In addition, in many instances there may have been a substantial amount of time that has elapsed between the completion of the original business plan and the funding of this same plan.  Consequently, many of the features, functions and capabilities, originally outlined in your plan, may no longer be required or on the other hand, there may be many new features, functions and capabilities required from your customer base that were not addressed in the original business plan.  So, in order to start fresh, take the time to verify your original assumptions. This will provide a clean jumping off point for development and allow things to move much smoother going forward with the initiation and execution of development.

Knock Down Unanticipated Development Road Blocks

Even once you begin the development process things can change substantially. The time and effort to develop a specific feature, function or capability may take much longer than anticipated.  You may be required to hire additional staff members to solve a specific problem.  Or, there may be a requirement to purchase additional capital equipment to solve a newly identified issue associated with your development.  As is always the case, when initiating product development, there are going to be new, unanticipated problems and road blocks that need to be addressed.  The trick is to identify and address these problems early.  You do not want these same problems and/or road blocks to spiral out of control, adversely affecting your development schedule and overall development costs.  In addition, you do not want to sweep any of these same potential problems under the rug, as issues identified and addressed early are much easier to solve and will have much less of an impact on your product development and delivery.  So, that the  time to knock down unanticipated development road blocks early, it can only help you in the long run to provide a timely delivery of your technology, product or service offering to the market.

Actively Manage the Development

As the CEO of a start-up company you need to actively manage and be involved in all aspects of your technology, product or service offering development.  Do not take a hands-off approach to managing the development of your start-up company’s key product offering(s).  This will only come back to burn you in the long run.  As the CEO of your start-up company, the buck stops with you, and as such investors will hold you accountable for any schedule delays, unanticipated increases in development costs, etc. In addition, as part of actively managing the development process, you need to understand all of the crucial parts of development, including educating yourself in areas they you are not technically familiar with or lack a basic understanding of the underlying development process.  This is education process is necessary, as it will provide you with the proper insight to ask the right questions, and understand when things just do not make sense, with regard to an unexpected development delay, etc.  By actively managing the development process, you will be able to hold all of your key development managers accountable and assure the timely and cost efficient delivery of your technology, product or service offering.

Product development is really where the rubber hits the road.  All of the activities up to that point have only been planning related and to some extent do not necessarily reflect all of the realities of an actual development.  As such, there are many things that will need to be addressed once you begin development.  To ensure a smooth development process you need to verify your original assumptions, knock down any unanticipated road blocks, and actively manage the development.  Anything less will not result in a successful development and result additional incurred development costs and a longer delivery schedule.  So take the time to address all of the issues associated with your development early on, as it will ensure a smooth, cost effective product development and delivery.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.

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August 30, 2010 - Posted by | Venture Capital | , , , , , , ,

1 Comment »

  1. Outstanding article Robert! I am always amazed when our potential investors, as well as grant applications, ask for 5 year projections. We are still developing our product. We change things every week as we learn what works, what doesn’t, and what users want. The iterative process is very valuable and doesn’t mesh well with a formal business plan. We have one, but I’ve rewritten it many times, and you are absolutely right that it is out of date the moment it is written. Nice to see someone who understands!

    Alan

    Comment by vonei | August 30, 2010 | Reply


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