How external events affect your business and funding

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A friend has a viable startup in an unusual industry, for which he’s proven he can turn a profit and attract the attention of investors. But closing a funding round has been elusive. Why?

There are many possible reasons, and several options for my friend and his bootstrapped business — including organic growth. But whether his funding to grow comes from organic cash or Series A investors, we hit on a way to think about his company’s weak spots the way an investor might — or a self-funded founder should.

I learned the framework from author, consulting coach, and former Bain consultant and manager David Ohrvall, and modified it from approaching consulting problems with Big 4 firms and Fortune 500 clients to work with startup problems. (It works either way, and if you’re an innovative manager, it’s a terrific shorthand for imagining future impacts on your business unit.) Ohrvall’s acronym of choice for considering external forces acting on a business was “SPECIAL-T,” as in “Cracking business cases is my ‘specialty.'” I add “D,” to make it “D-SPECIAL-T,” as in “De specialty of the house is improvement.” Consulting is all about mnemonics.

Here’s what I suggested for my friend, which you can try, too:

9 Ways External Events Impact Your Business

Demand — Are consumers approaching your product or products they consider to be like yours in a new way? Which way is that trending, and how are you prepared to meet them?

Suppliers — Are your suppliers affected by challenges or opportunities that will affect how they wish to partner with you and your business? Which way is that trending, and how are you prepared to meet them?

Political events — Are there political factors that are likely to affect how consumers, suppliers, or regulators will look at your product or products they consider to be like yours? Which way is that trending, and how are you prepared to succeed in any potential new environment?

Economic factors — What is happening in the broader economy? Is it getting easier or harder for you, your suppliers, or your business-to-business customers to borrow money? Raise money? Justify spending money? Which way is that trending, and how are you prepared to succeed in any potential new environment?

Competition — What are competitors doing in businesses that are exactly like yours, or that you draw inspiration from? Do their actions suggest new options you should consider defensively or proactively? Which way is that trending, what factors are driving their decisions, how are you similar or different, and how are you prepared to succeed in any potential new environment?

Industry factors — What is the storyline for the industry in which outsiders consider you to operate? Is it expanding or contracting? What are the charactersitics of the safest companies? Are you beating expectations? Are you communicating that sufficiently? Which way are things trending, and what will you need to do to succeed in any potential new environment?

Auditing and accounting issues — How does compliance and regulation work in your industry? Do changes contemplated by regulatory bodies have a bearing on how you will need to operate in the future? Which way are things trending, and what will you need to do to succeed in any potential new environment?

Legislative events — Have lawmakers noticed your business or your industry? Are they talking about changes? Which way are things trending, and what will you need to do to succeed in any potential new environment? Should you be involved in the conversation with legislators before they draw conclusions?

Technology — What advances can change the way you structure your business, understand or engage with your customers, or alter your offerings? Which way are things trending, and what will you need to do to succeed in any potential new environment?

The framework is a variation on PESTEL analysis, which may have orginiated in the 1960s and 1970s from the work of Francis J. Aguilar, Arnold Brown and others. “PESTEL” stands for trends impacted by “Political, Economic, Social, Technical, Environmental and Legislative” events. It’s a useful marketing approach to looking at new ideas or future business environments, and outlined here.

The answers to the above questions are good to have in mind, whether facing potential funders, board members, or the market. It especially matters in unusual niches, like my friend’s. When funders, partners or potential customers are interested in you and your product, they bring with them the story-line and popular experience that an outsider can acquire. But the limits of their skepticism likely will be traced by the outlines of what they can observe in the marketplace.

Knowing your business is your “specialty.” But allaying a newcomer’s concerns about the future of your business can be just as special.

– James Janega

@JamesJanega

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