Jones Center Alumni Perspectives
"How did you write a business plan that was successful the first time?" - by Steven Fleck (Tepper MBA, 2004), co-founder and chief technology officer of ClearCount Medical Solutions
One of my favorite parts of graduating from the Tepper MBA program and going on to start a business is the opportunity to come back and share my story with students who are considering starting their own venture. I am often asked: “How did you write a business plan that was successful the first time?” and “How did you know there would be such a demand for your product?” While I’d love to take credit for being smart enough to predict exactly what it would take to start our business and commercialize our product, to be truthful, parts of our plan evolved dramatically to accommodate market feedback, development setbacks, or other unforeseen obstacles. As for predicting demand in the marketplace, our product is a disruptive technology that has had to define a new market segment; it was impossible to predict how the market would react to our offering or what price they would accept. So the short answer to these questions is that while I didn’t know for sure, I knew I was close enough.
The funny thing about these questions is that I believe anyone who has stepped foot inside a Tepper entrepreneurship class already knows the answers. But I don’t blame them for asking. Everyone knows that starting a company is risky and that an entrepreneur can never truly eliminate all the risks. What I believe people are really trying to say is: “What level of risk should I be comfortable with before I turn down other job offers to pursue this idea? Please tell me I’m not crazy!”
Unfortunately, the level of risk each entrepreneur is willing to accept before jumping into a new venture is a very personal decision, and there is no single answer I could give that would work for everyone. What I know for sure, though, is that the entrepreneurship program at Tepper provided a huge advantage for me as a first-time entrepreneur. It taught the skills required to analyze the risks I would face and presented opportunities to meet people who gave valuable insight into the market. Most importantly, the program gave me the time to develop the business plan and gather market information in a ‘safe haven’ before getting my hands dirty in the real world of fund-raising, product development and commercialization. I think of the Donald H. Jones Center for Entrepreneurship as a prototype shop for business plans, with a team of experts to help you fine-tune your product in a low-risk environment.
The entrepreneurship program can’t fully prepare you for everything that’s ahead should you decide to start your own business. There are some aspects of entrepreneurship that truly need to be experienced first-hand to be understood - which brings to mind the other most commonly asked question: “If you knew then what you know now about starting a company, would you still do it?”
The answer is undoubtedly yes, although I might have tempered some of my overly ambitious expectations had I known how long it takes to develop and commercialize a new medical technology. It’s not that professors and advisors didn’t try to convince me of the reality, just as I do myself when I talk to Tepper students nowadays. I think it is inherent in the nature of the first-time entrepreneur to believe he or she can buck traditional wisdom and achieve the mythical “hockey stick” growth curve in the first three years of operations. But that’s not such a bad thing. Maybe if everyone knew the struggles going in, fewer potential entrepreneurs would be inclined to suffer the trials (but consequently feel the excitement of the successes that keep them coming back as serial entrepreneurs).
Two framed photographs on my desk serve as reminders of the long, hard lessons I’ve learned since I graduated from Tepper and went straight into my start-up. The first shows my partner and me accepting our very first investment from the Pittsburgh Life Sciences Greenhouse in 2004. Our beaming smiles as we proudly held the check in our hands still brings me back to that day five years ago, when all of our countless business plan revisions, investor pitches and sleepless nights had finally paid off.
The second picture is me, five years later, holding a check from our first paying customer. And while I’m looking no less joyful in this snapshot, there’s no denying that this is not the same naive 26-year-old rookie entrepreneur of the first photograph. Looking at these two pictures as the five-year anniversary of my company approaches, I can’t help but wonder what advice the guy in the second photograph, if he had the chance, would give his younger counterpart holding that very first check back in 2004.
The first piece of advice I would give my younger self, or any budding entrepreneur, is to know your customer inside and out. This can be an intimidating proposition for someone who is relatively new to an industry like medical devices and a market like the surgical operating room. In the early days of ClearCount, it was not easy to get access to nurses and surgeons, let alone to be allowed to observe surgical procedures. Persistence pays off, and adversity leads to opportunity – the more challenging it is to build inroads into your market, the more valuable your relationships become in providing a barrier to entry for others.
The end result of a close relationship with the customer is a very tight feedback loop between end users and those developing and building the product. But this feedback is only valuable if the entrepreneur and his/her investors are willing to accept the inevitable change that comes with accepting input from your eventual customers.
This leads to my next piece of advice for young entrepreneurs: Try to choose investors who are familiar with your market and with the dynamic nature of start-ups, and communicate as much as possible with them to avoid surprises when the plan or strategies need to change. ClearCount has been lucky enough to have a solid group of investors and board members who have supported us through three different versions of our product before we found the one that was right for the market. Had we not had an understanding and experienced group of supporters, we might never have made it this far.
Aside from changing products, strategies, or completely revising a business plan, there is another kind of change that is even harder for first-time entrepreneurs to anticipate (and fairly difficult to explain to those who haven’t experienced it first-hand). This is the change that comes with being part of a rapidly growing organization. While every budding entrepreneur in the MBA program expects his or her business to grow from a handful to thirty or forty employees in the first three years, almost none of us has any clue how to manage this kind of growth. Not only does it become exponentially more challenging to communicate your vision across the organization, but it takes a lot of self-examination and humility to identify the roles that you are uniquely skilled in while giving up control of other roles to better-suited individuals.
I’d advise any first-time entrepreneur to write down a list of personal goals and roles they’d like to fulfill during the first three to five years of their company’s growth. One of the great things about starting your own venture is the flexibility to truly define your role from the start, and that role very likely will need to change over time as the company grows. Putting thought into the dynamic nature of your role as founder, and sharing that plan openly with your company’s stakeholders, will ensure that everyone shares your vision for your own place in the company and will avoid any future surprises or disappointments.
The final piece of advice that comes to mind as I look at the younger me in that first photograph is to be patient; keep the end-goal in mind but celebrate the small victories along the way. Looking back on our original business plan developed in the entrepreneurship program, it is filled with soaring revenue numbers, a large and growing product pipeline, and of course the promise of a huge exit, all within the first 3 to 5 years. While we’re still on track for those things, the tried-and-true rule of thumb that investors rely on - cutting revenues in half and doubling time to market and expenses - has turned out to be closer to reality than the original plan.
Stopping to recognize and enjoy milestone achievements such as our first successful clinical trial, FDA approval, and our first big customer have kept me and the team encouraged that we are making steady progress rather than disappointed by the delays and occasional setbacks. So if I could say one thing to that ambitious young entrepreneur fresh out of the Tepper MBA program five years ago, it would be to relax a little and remember that an entrepreneur’s role is to stay focused on the final destination, but not at the expense of enjoying the journey. But knowing him, he probably wouldn’t have listened to my advice anyway.
