A VC in Vacationland

The CEO at one of my former portfolio companies (we sold LeanLogistics last year to Brambles Logistics), Dan Dershem, reminded me of the most important question an entrepreneur can ask themselves as they develop their business/product/service plan–who writes the check?

What he meant was who writes the check at your potential customers.  When I ask the question of entrepreneurs, I often get a foggy answer.  Next to having a world class product/service idea, the most important part of a business plan is figuring out who is going to write you the big checks to buy the solution.

I have sat on boards where this can be the question du jour. It often starts with the concept that a C-level executive is going to be the key decision maker/buyer.  Fine, but the C-levels turn over the details to their subordinates and that's where the problems start.  Your world class product/service technology undoubtedly steps on someone's toes/project/ego/whatever.  What started out as an easy sale to the CEO ends up in a nightmare of bureaucracy, with numerous additional "approvals" needed to close the deal.

How can you avoid this rookie mistake?

First, be sure that you can answer the question: "who writes the check?", not only in developing your initial business plan, but every time you need money–from Uncle Jack, outside investors, customers or your bank.  You need to clearly understand the terms and conditions under which they fund companies, as well as what types of businesses they are interested in funding.

Second, make sure your team is tuned into where the money will ultimately come from in the products and services you are developing.  Designing solutions for the wrong audience can make the sales process difficult and elongated, as additional players need to be sold.

Third, you better be working all the "influencer's" in the potential customer organization besides the C-level executive.  No one likes to be told by the C-level guys that they are stupid for not having discovered your great new solutions.  Theses "influencer's" will find all sorts of reasons to make your deal and your life difficult.

Finally, keep testing the market place around the "who writes the check?" concept.  When you see competitors who have equal or inferior (note: they are never better than your product, right?) offerings beating you in the market, I'll bet they are doing a superior job of getting to the people who write the checks at the customers.