Can Mission Statements Help Me Grow My Entrepreneurial Business and Create Value? Absolutely!

You ask your entrepreneurial management team to join you in the conference room to develop the company’s mission statement. Reaction from your entrepreneurial team may be “ho-hum”, “do we really need to waste time – we know what business we are in,” or maybe ” let’s spend our time doing real work – designing, developing, selling.” Understandable response in today’s fast- moving, entrepreneurial companies.

But mission statements drive companies, especially startups seeking to secure a sustainable business that creates high value.

Mission statements provide many benefits- here are three examples:

1. Ensures all staff is in sync, understands where the company is heading, how it will get there.

Emphasize that the company will be the lowest cost provider with well defined cost metrics sends one message; emphasize providing the highest quality, differentiated products sends another. Remember these not-too-subtle differences drive corporate strategy, operational plans, messages to investors, and often define an organization’s future success.

2. Communicates what the company thinks is most important, what are its core values.

Emphasize customers, products, technologies, staff development or social benefits sends different messages to the company’s “community of interest” (i.e., staff, customers, investors, suppliers, etc.). You need to ensure these messages are clear, focused. and support the company’s business model and value creation strategy.

Learn from traditional leading firms- one example I often refer to is the mission statement for innovation leader 3M. 3M’s commitment to innovation is reinforced in the company’s mission statement: “To solve unsolved problems innovatively.” And 3M backs that mission statement with solid operational plans and policies that reinforce this commitment. May sound boring to some, but make no mistake- mission statements can successfully drive companies, both entrepreneurial firms and market leaders.

3. Defines the “reach” of the company’s business- what are the real business targets going beyond today’s technologies, markets and products.

Defining how your company will evolve, to what extent you will protect a current business or create new ones, and similar issues, define your company’s “reach” and strategy roadmap. For dealing with investors, this is particularly important.

My counseling with many entrepreneurial firms shows that spending time to define mission statements and particularly “reach” provides high value.

As an example, in my recent book, Worm on a Chopstick: Understanding Today’s Entrepreneurial Age: Directions, Strategies, Management Perspectives (“Chopstick”), I compared Google and GM’s mission statements. First, here is GM’s:

“G.M. is a multinational corporation engaged in socially responsible operations, worldwide. It is dedicated to provide products and services of such quality that our customers will receive superior value while our employees and business partners will share in our success and our stock-holders will receive a sustained superior return on their investment.”

Now here is Google’s mission statement:

“To organize the world’s information and make it universally accessible and useful.”

It sure looks like Google is reaching for the stars here. And the results? Google, founded in 1998 by two Stanford University students, started as a basic search engine, ramped up sales to about $17 billion in 2007, and achieved a market cap of about $220 billion. Compare that to General Motors, started in 1908, led sales for seventy-seven consecutive years from 1931 to 2007, and valued at less than $20 billion in late 2007, less than 10 percent of Google. Even after a $50 billion government bailout in 2009, today, GM’s market cap is only about $51 billion, less than one-third of Google’s $173 billion.

You can argue I selected a dramatic example here. You may also argue that Google was in the right place at the right time, at the cusp of the Internet revolution, while GM is stuck in a tough, mature business, automobile manufacturing, with nowhere to go but fight for global market.

I consider this traditional thinking that really doesn’t work well with markets and technologies morphing, emerging global players, and intense competition from non-traditional players. Looking deeper, like many major traditional companies, we learn GM had opportunities to improve competitive positioning but did not pursue them for various reasons.

To succeed today, what’s needed is ‘entrepreneurial thinking’, a term I suggested in “Chopstick”, driving mission statements and all facets of a company’s business, whether you manage a startup entrepreneurial company or a large traditional company like GM.

So when you and your team leave the conference room after creating your company’s new mission statement, you may be excited that you are now on track to create the next “Google”. Maybe, but you will at least now have a strategic roadmap that will drive your company’s operations at all levels, send a coherent message to all, help you grow your company and create value.

Paul B. Silverman is the author of a new entrepreneurial management strategy book Worm on a Chopstick: Understanding Today’s Entrepreneurial Age: Directions, Strategies, Management Perspectives. A seasoned entrepreneur, global management executive, public and private company CEO, educator, management consultant, speaker, and former founding Director of the Entrepreneurial Step Up Program at George Mason University targeting CEOs of early stage high growth companies, the author recently launched a global entrepreneurial seminar series and is well known in the global information industry and venture community.

The 5 Entrepreneurial Funding Sources – Where to Get Capital for Your Business

There are multiple sources of entrepreneurial funding. A typical start-up will seek entrepreneurial funding sources during 5 separate stages of business development. Typically the Entrepreneur will develop an idea and fund this research and early stage market research with his own funds, he will then seek out the “FFF” investors who may fund his idea with, lets use $15K as an example.

An accelerated start-up may seek out an Angel Investor after 3 months, netting $200K and after another 6-12 months they may seek a further $2M from a Venture Capitalist.

Before we begin talking about funding, it’s important to note that building a business using the traditional model and leveraging “Entrepreneurial Funding Sources” is not the only way to succeed. Companies such as Mailchimp and others have succeeded using their profits to fund their growth, which is known more commonly as bootstrapping.

So in a nutshell, here’s how Entrepreneurial Funding Sources work. You start off with a pie, that’s your dream, your idea for the business. Its a small pie but its all yours. You decide you would like a larger pie but don’t have enough ingredients (cash in this case) to make it work so you enlist the help of others.

First you get a friend or family member to provide some additional cash to make the pie bigger, you give a share of your pie to the family member who has helped supply the cash.

Next you decide you want an even bigger share of the pie so you seek out additional Entrepreneurial Funding Sources in the form of Angel investors and Venture Capitalists who will provide the funding for a slice of the pie, your slice in terms of percentage get smaller but the overall pie is much larger so you effectively have more pie (Remember it’s cash we are talking).

Finally you want to take the pie public because that where everyone will have the opportunity to supply ingredients – yep cash – to ensure your pie is increased to the maximum size. Each of the pie investors will take a share, and your own share percentage wise may be small but worth a large chuck of… Pie.

So technically the 5 Stages of Funding Sources are:

Idea/Co-Founder Stage

This is where the idea is yours and/or your partners alone. You own everything in the company and there is nothing to share with anyone else. Family/Friends Stage This stage allows you to seek small amounts of funding from family and friends. The typical amount of funding here is $10-15K and for that the investor would expect in return a 5% stake in the business. This stage is often referred to as the FFF, friends, family and fools stage because it is high risk investing in a business at this early stage however the returns are often very high.

Angel Investment

There are two trends of investment that are starting to appear in this entrepreneurial funding sources. We are seeing the emergence of Incubators and business accelerators as a viable alternative to outright investment. The advantage of these funding sources is that they do not only provide the cash they also provide collaborative workspaces and business advisors to work alongside. The asking price is steep at 10%-15% for a $25K investment but often the chance to work with these advisors is worth the equity alone. The second choice is a straight out investment where an angel investor would contribute anywhere from $200K – $1M with the average in 2012 being $600K. (Source: Halo Report) with a typical equity share being 15-25% of the business. This is the type of investing done on television shows such as the Dragon’s Den which is a personal favourite of mine.

Venture Capital

This is where things start to get serious. Venture Capital can have multiple rounds and each round takes a share of the equity. VC’s typically invest more than $500K and it’s more likely to be in the multiple million dollar range to get them excited. They will value their slice of the pie as a formula of the companies net worth divided by the amount they are investing i.e. a $4M company valuation, where they put in $2M puts the company at $6M post investment so the VC expects a 33% share of equity.

IPO

An IPO is technically just another way to raise capital for the company. The company is listed publicly and anyone can purchase a stake in the organisation, including Mum and Dad investors who missed out on investing at the very start because they thought it was too risky.

So in summary, Entrepreneurial Funding Sources are straight forward and common sense. They are simply a way of increasing the amount of capital available for your business to grow. You will give up equity along the way to each of the Entrepreneurial Funding Sources however this sacrifice is to gain a larger and larger share as the pie gets bigger.

Simon Maselli, is a world-recognised business consultant for Metamorph specialising in business innovation [http://metabiz.com.au]. Simon has 20+ years of experience on international projects and business, developing profitable businesses and advising in the areas of Innovation, Entrepreneurial Leadership and Corporate Sustainability. He is known for his inspirational communication style and his repertoire of innovative, practical, and highly effective solutions to the challenges that technology-orientated companies face in today’s business landscape.