Part of my EnRich™ Wealth Management training programs is the topic on entrepreneurship. And when I ask participants which one thing it is that hinders them from setting up their businesses, the invariable reply is capital.
Actually, money should be the last (though not the least) on the list of things that a start-up business should be worrying about. Every business needs PMPM or for easy recall, “Papa, Mama, Papa, Mama”.
The first “P” is for production. The first “M” is for marketing. The second “P” is for People. And the second “M” is for money. Please refer to the following illustration:
The germ of a business start-up must be that product or service that will address a need or a want. This is where creativity needs to be at its highest. Worrying about money first simply kills the creative process.
The start-up businessperson must know how to produce that product or service at the optimum level of quality and efficiency. This optimum level is dynamic and not a static level in the sense that there will always be better ways to do things, especially with competition on the heels of the start-up businessperson.
But a great product or service will not be bought if it is not marketed properly. Marketing is not just selling. The classic definition of marketing is that it has four “Ps”, namely: product, place, price and promotion. In a nutshell, the start-up businessperson must be able to make his product or service number one in the mind of his target consumers. This will involve a combination of marketing strategies and tactics that range from packaging, advertising (both formal and via word of mouth), geographical distribution, pricing and promotional offers to both end consumers and distributors. Such marketing strategies and tactics must also strive to stay ahead of competition. Helping to grow the industry where the product or service lies is helpful if the said product or service is the first in the mind of the target consumers of the start-up businessperson.
No man is an island. No man has the monopoly of ideas and strength (both physical and financial). That is why an integral part of starting up a business is to know who the partners of the businessperson will be. Such partners involve people who range from employees and key personnel to mentors, as well as investors and members of the board of directors (if the business form taken is that of a corporation).
In the long run, the start-up businessperson will need to focus on overall policy. That is why he or she will need key personnel to run the day-to-day activities of the business. It is always good to bounce ideas off brighter and more experienced people, hence the need for mentors. The screening of private investors for closed corporations, will spell the difference between harmonious and volatile board meetings.
Last but again not the least, the start-up business person has to see from the very start whether his idea is financially feasible. It is with the money part that the start-up businessperson translates production, marketing and people into financial projections. The money portion will also reveal what kind of optimum financing mix the business should espouse. And just like with production, marketing and people, financial performance and projections under the money part must be constantly reviewed and updated.
In a nutshell, PMPM is nothing more than a business plan. The larger the business, the more formal and documented the business plan should be.
(Originally written by Efren Ll. Cruz, RFP at http://www.savingstips.com.ph)
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