Ideas
are dime a dozen; People who implement them are priceless
~Mary
Kay Ash
The
world is full of incredible ideas that never go anywhere because great ideas
are useless without someone full of passion to implement them. I realise that
most of the people I come across have a lot of enthusiasm while running their
businesses. They are the ones who try to “implement” their ideas. They know
what it takes to run a “successful” enterprise. They know how to draw business
plans, cash flows etc. However in most of the cases I have observed that two of
the most vital aspects are not addressed properly or they are totally ignored.
They are: The Employee Compensation Plan and the Product/Service Pricing Plan.
Shockingly
these aspects are not given their due justice and I share my views and the
importance of these in running a successful enterprise.
Every
startup makes business plans, power point presentations, executive speeches,
interviews, org charts, website, brochures, videos, blogs etc. If you are an
entrepreneur I am sure you have covered most of the things I have mentioned.
They are vital as well but my observation is these activities may sometimes
lead the investors astray and impede their ability to really understand your
Company. This could delay fund infusion or in some cases may also lead to the
deal being called off.
I
have worked on both sides of the investment cycle i.e. the investor side and
the Entrepreneur’s side and it is my observation that having a detailed
Employee Compensation Plan and a pricing strategy is the quickest way to gauge
any business. A considerable amount of time and efforts need to be put to draw
an acceptable strategy. These two aspects can make or break a deal.
It
is very important for start-ups to understand that financial incentives are one
of the key tools to implement any strategy. A startup should have a plan to
give incentives to not just its employees (read sales team) but also to its
customers.
The
entrepreneur should imagine himself to be an employee or a customer. I feel
questions like these need to be answered by these plans:
As
an employee
ü
Are my earnings capped?
ü
Do I get more if I close deals or am I being
forced to wait till next sales period?
ü
Is my work recognised on selling to existing
clients or on getting new clients?
As a
customer:
ü
Do I get incremental benefits if I continue to
place orders with this firm?
ü
Is my loyalty to the product/service being
recognised and rewarded?
ü
Do I get rewarded for buying single service or a
combination of services?
In
quite a few cases I have found that:
·
These documents are non-existant
·
If they are drafted then they reflect views exactly
opposite to that of the publicly stated strategies.
Aligning both these plans with the overall strategy
will help the entrepreneur to convince potential investors. I firmly believe
that business plan and other documents are usually very well scripted but an
experienced investor will always check these two aspects before investing,
therefore due importance needs to be placed on the facets of an investment deal.
Like
I said earlier this could make or break your deal, after all Employees and
customers are supposedly the most important aspects of any business.
By:
Ashutosh
Muglikar
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