Today on one of the linkedin groups I am connected to there was a request concerning business planning.
As it has been my rule since 2008- anything that I do for free goes eventually online (except for confidential information, of course).
In this case, it was a community for artists.
I will give you at the bottom of this posting the same 5 bits of free advice that I sent today- but, before, as a case study, I want to describe the steps toward the development of a prior website.
In the late 1990s I wanted to create an online website for art galleries and artists, with various sub-communities.
Eventually, I suggested to one of my contacts started learning PHP+MySQL, and then he introduced an acquaintance with experience in the PR part of museums.
So, as a first step, we focused on art events- of interest for all the parties involved, and a model that could easily be replicated for other communities (theatre, music, and so on).
Yes, it was before the current crop of social media- therefore, bandwidth was expensive; hence: originally, text-only.
Our deal? I did not want to be involved in the operations or really profit from the operations- for me, it was more a service to the Italian art community.
So, I agreed on developing business, marketing, and pricing model, along with coaching on the technology, and support also positioning the “culture”.
My return? A deferred income after two years and for two years, plus a 5% shareholding.
My first advice: separate formally the “community” from the “services” part- most startups had then a tough time in getting financed, and therefore the financing was to be generated by complementary activities (the main reason why I postponed by retainer- I did not want to drain cash from the operations).
But as few Italian art galleries and museums at the time even had a website, and we needed to attract the “early adopters” to gain acceptance within the “industry” as a serious venue, offering web development services on the same website would have been the best way to build enemies: the incumbent web developing companies (”web agencies” wasn’t really used at the time) used by the early adopters.
The services were to be then expanded using the usual business process outsourcing approach (I had been working in technology and process outsourcing for the first time in late 1980s): e.g. from virtual PR office to simple data-entry of events, and communicating electronically on behalf of the entity (what I had called “strategic outsorcing”: you have to be embedded in the customers’ business processes; see on BusinessFitnessMagazine an essay that I published few years later).
I stopped supporting them when my 5% was “forgotten”: therefore, I did not deliver the pricing and community building/servicing model.
They started the website as a free site, instead of using my hybrid of what now is the typical free+premium and ad hoc/syndication services (i.e. basic services for free, and then increasing level of services for differential types of service contracts, plus affiliation and content syndication).
Eventually, I was asked to resume the activity, and to deliver the pricing model- this time, for a 10% share, and everything else that was in the first contract.
Of course, I said that the original pricing model was now worthless: unless there are compelling reasons to buy your service, whoever gets a service for free is unwilling to start paying for the same service.
You have to repackage and qualify the request.
The website went up to 2mil contacts/month (I saw the log), and I also delivered a first draft of the English translation of the user interface, so that the website could be used to develop potential franchising/branches abroad (it was part of my revised contract).
Considering that the website was now quite visible in Italy, and that the English version would have given a unique window on the art environment, I build a model to actually coach and franchise the activities in other countries (starting in Europe), using low-cost but professional art and communication students as correspondents, with local art communication professionals as the “lead” in each market.
Again- the 10% wasn’t delivered. So, I stopped.
Shortly thereafter… I was asked again to resume the contract- and this time of course I was not interested, also because eventually a “white knight” was involved.
As I said to many startups: beware of the white knights or business angels. You know what you receive, and what you expect, but, unless being a business angel is their business, often a business angel becomes a business demon.
The typical case is the business angel who received a lump sum from selling a company- or retires.
And then, starts playing “capitalist” with part of his money (quite often are men).
You get the money, sometimes with payback schedules linked to their tax credits (first signal that they are not really interesting in long-term development), and sometimes they even ask to split their quota with a crowd of friends, relatives, associated, advisors (another sign).
Why these are two negative signs, in my experience?
The first one, for anybody who can read a business plan and do a basic cash flow analysis, clearly shows the risk that any other investor will actually support the first investors’ exit, not the development and risk sharing, as the original white knight would have forced using his financing not to build, but to present the company (white knight startups have often a quite unusual allocation of cash flow).
The second one, would deter any further investor: do you want to negotiate with a mini-parliament of a dozen or more shareholders who chipped in overall 1% to 10% of what they are asking you to invest, and who share no risk whatsoever?
Generally, there is another sign to identify a potential troublesome angel: a white knight offers to work part-time on the company.
He will then often roaming across the company in any area he feels like bestowing his advice on that day, without any development plan.
His initial investment will be an excuse to intrude in any meeting and do “impromptu coaching” and negotiation- and often to show potential customers that a “representative” of the company does not even know what the company is doing.
Personally- whenever I was told about potential “white knights”, I used to ask to have a quick chat, or at least to discuss together their background, to profile them.
Otherwise- I thought about “white nights”- with the founders calling in the evening to complain about the white knight absorbing so much of their time, until they get bored and ask to be paid back.
So far, both for startups and SMEs, I never found a white knight who is really what he pretends to be- and who does not get cold feet at the first sign of crisis, instead of doing crisis management/coaching when needed.
Eventually, we did a short negotiation, then I introduced them to somebody else, and wished them good luck.
Few years later, I wrote them to say that they could consider themselves free from any obligation- I just kept the written documents as mementos.
The company still exist- albeit my only link is a FB link with one of the founders (the original software developer), and the archive of the documentation exchanged (some of the marketing material that I wrote is still being used, after all this time!).
As for the artist community, eventually few years ago I created a directory of Italian artist’s agencies (www.theatralis.net), mainly to support foreign artists interested to work in Italy.
If you read P. Kotler’s “High Visibility”, you probably know that each artists is surrounded by a “cloud” of supporters, whose level of professionalism is not necessarily related to the visibility of the artist- albeit often this is the case.
Working in the art environment is certainly a different experience- you can find anything, from the pure materialist to the ascetic, but anyway not your cog-in-the-wheel personality.
The current crop of artists generated by the media industry sometimes are selected and managed from day one up to the end of their career, and therefore can eventually become a more frequent exception to this profile: they are selected and built not for talent, but for manageable visibility and investment return.
If you aim to support artists who prefer or can manage their own visibility, then maybe these few bits of free advice could be useful:
- Define the model now, and start delivering as much as you can without waiting too long
- Most online services are innovative if they are the first, but never build the “Adrian’s wall” that is represented by being the incumbent in other markets- so, don’t plan on using it to control the market; the first entrant evangelizes the market for everybody: including the investors supporting your future competitors
- Working with artists requires focusing on doing more than just publishing what they produce- established artists will have a “cloud” of support services, while new artists will instead usually have a “cloud” of self-appointed “experts”: more a nuisance than a support, as they would constantly second-guess what you offer
- Final bit of advice: if you really decide to go for a business+marketing plan, do not adopt an accounting perspective or an industrial production approach: market evolves, and the online market evolves even faster
as for the business+marketing plan… are you sure that right now it is not enough to prepare an investment prospectus, until you see the market response to your prototype?
