Today, I’ll begin a three part series on the Timmons Model because the principles are still relevant and can help you assess and develop any business opportunity. Let’s review them.
The Elements of the Model
There are three elements to the Timmons Model. I first learned the three-point version in an Entrepreneurship Class taught by Stephen Spinelli, founder of Jiffy Lube and former Babson Graduate School of Business Professor.
The primary forces in the Timmons Model are the founder and entrepreneurial team, recognition of the opportunity, and the resources needed to start the business. When those three line up like a lucky roll of dice, the venture has the opportunity to generate commercial success for you and your investors, if you have any. However, this isn’t a model of luck. Instead, it is based on real-time, realistic assessments that can make or break the bank. In today’s series Part 1, we’ll review the principle element, the entrepreneurial team.
The Entrepreneurial Team
Entrepreneurs don’t wait for something to happen. Instead, they create from scratch, recreate, or seek opportunities that can be molded into commercial success. This principle suggests that the lead entrepreneur, also called the founder, has the skills to execute on his or her vision. If the founder doesn’t have the skills, he or she has the ability to pull together a team that does.
Although the founder may not have the skills, they understand the opportunity sufficiently enough to know how the opportunity should play out. An example would be Phil Knight. Phil did not have the skills to make a pair of NIKE sport shoes, but as a runner, he understood that a shoe’s gripping ability could create a performance advantage for the wearer. Nike’s performance and subsequent technological enhancements enabled Knight to build a multi-billion dollar company. In fact, Nike’s LeBron Air Max X may cost as much as $300+ when the company releases the Nike Plus Technology version. In short, the cornerstone of Nike’s success is built on Knight’s running skills and instinct.
I used to resent the idea that the Timmons model is based on a team. Most entrepreneurs are lone rangers, they may build a team, but the initial idea originates from a lone ranger. However, there are some that would argue that you need a team to build a business that is large enough to realize a capital gain versus an income. Nevertheless, the lack of a team should not stop you from pursuing that big idea. Just do it.
In my view, the Internet affords everyone the ability to capitalize on an opportunity and build substantial wealth independent of a team. A few notable examples include Harry Potter Series author J.K. Rowlings, the founder of Carol’s Daughter body-care products Lisa Price, and the world’s youngest self-made woman billionaire Sara Blakely, who created the ultra modern girdle known as Spanx. These women, and there are many more like them, albeit not as wealthy, as well as a universe of men, initially pursued their interest, passion, and ‘aha’ moment, independent of anyone else. So an entrepreneurial team is great, but if you have an opportunity you need to get on with it.
In analyzing the entrepreneurial process, there are no systematic models to follow. I often tell people follow your passion. Or, start with what you know. However, that is just the tip of the iceberg. You really need a framework in which to assess your idea and that is where Timmons model becomes particularly useful.
While passion, knowledge, instinct, and experience are tremendous starting points, Timmons model isolates the three driving forces behind new venture creation, the founders (entrepreneur), opportunity recognition, and resource requirements. By separating and continually analyzing all three, you can improve your chances of success. Here’s why.
For any new venture, many variables are happening and changing constantly. As an entrepreneur, your role is to manage and manipulate the variables to your advantage. For example, let’s say that you start a business. It could be anything as long as it results in what is referred to as a profitable internal rate of return (IRR).
As a newly minted entrepreneur, you may go through a number of iterations before you find something that sticks and returns a sufficient IRR. The fact that you are in a trial-and-error state of flux suggests that you possess the will, energy, mindset and know-how to keep at it until the outcome results in the required IRR. Not everyone has what it takes to be an entrepreneur.
The aspiring entrepreneur must work with several unknowns impacting his or her ability to execute on their idea including the following:
- Timing. The opportunity has to occur at the right time. Facebook came along at the right time.
- Fit. The framework has to fit. Apple had Steve Jobs, the Macintosh Computer, and investors willing to bet.
- Founder(s). Whether you go it alone or have a team, you have to have the intellect to execute. In other words, you need to know something about the industry, offering or users; you must have a strategy to enter the market; and you must know the margins of the industry, i.e., for every dollar sold, how much should be costs versus profit.
If you possess elements which make a great entrepreneur, you have one third of what it takes to realize a high-potential venture. The next step is to recognize the opportunity, which we will cover in Part II of our series next week.