Good Business Plan Is a Thing of Beauty

Some time ago I wrote that one way to encourage entrepreneurship is through business-plan competitions. Early this month in Moscow I was a judge at such a competition sponsored by a number of local vendors including Rambler, the leading Russian portal.

Other sponsors included the local offices of Arthur Andersen, Sun Microsystems and Monitor Consulting, as well as the Swedish-owned, Moscow-based Brunswick brokerage.

The idea was to honor the spirit of entrepreneurship, to provide some visibility for Russia’s honest business start-ups and to promote Rambler (https://www.rambler.ru), the initiator of the idea, as a major voice of the new economy in Russia.

The four judges didn’t receive the plans until dinner the night before, so we could assess them fresh. Meanwhile, the companies had been getting feedback and training from the sponsors.

The idea was not just to pick a winner but to give all the 200 promising applicants feedback and advice, helping them to turn a raw Internet idea into a formal business plan with financial statements.

There were four finalists who would meet with us the next day to learn not just from feedback to their own presentations but also from their colleagues:

* Russianoilandgas.com, a would-be exchange for oil-field equipment and services.

* BIDS, a brokerage information and dealing service, a would-be competitor to the equivalent from Reuters, but much cheaper and Internet-ready.

* Animation Studio, a leading-edge development group with a variety of patents to its name.

* Krasota Online, or Beauty Online, with a haircut-simulation tool.

My immediate reaction: Enough with the beauty salons--not a serious contributor to the Russian economy and probably a chintzy consumer play with great graphics and little else.

The winner? Krasota, of course. As we went through the plans and questioned the entrepreneurs the next day, it proved the principle: a business plan is about as enlightening as a resume. It’s just the first step to meeting the people behind the paper.

In this case, all the plans were promising (and after all, being one of four finalists was an honor in itself). But Krasota’s founder, Andrei Zhukovsky, impressed us the most with his focus, the clarity of his vision and his ability to create a real business from nothing, boot-strapping a single piece of technology and a $50,000 loan into a business that should generate about $90,000 in revenue this year.

He’s also a fine example of how military/aerospace expertise can be converted to peaceful, even love-provoking uses. Rather than a hairdresser selling to his erstwhile colleagues, he started out as a programmer at Star City, the facility where Soviet rockets were designed and cosmonauts were trained.

One of Zhukovsky’s projects was to help design a flight simulator for the Soyuz-TM spacecraft. The design was a good one and sold to the West, but Zhukovsky received little benefit personally. That started him thinking--and talking with his wife.

With her support, he ended up designing a haircut simulator, YourStyle, that allows a hairdresser--or a customer--to create a custom haircut and to model it on a scanned-in photograph, full-face and in profile.

The professional version also allows the user to specify factors such as hair and face type to offer the best choice for a particular client. It includes 1,000 model haircuts, plus glasses and even facial hair for the men’s version. That was in 1997. Since then, Krasota has grown to 11 employees and its line of software for salons includes a hair-salon management system (YourSalon) based on Russia’s best-selling small-business accounting package.

Krasota has helped equip 250 Russian salons. There are some 15,000 yet to penetrate, and the number is growing every month. Krasota also has signed a contract with a chain of Italian salons, called ModaModi, with more than 25 salons.

Hair care may not be a fundamental human right, but it supports a civilized society and it employs a lot of people. It is also a good place for budding entrepreneurs, and every community needs such a service; it’s not the sort of thing that works only in Silicon Valley or Russia’s equivalents in Moscow and St. Petersburg.

Krasota also offers an online cataloging of professional beauty products--shampoos, hair dyes and various cosmetics and lotions.

The point of the business plan was to raise financing for the next stage: to expand marketing, hire a new advertising salesperson and offer the haircut simulations as a paid service ($2 for a three-hour-maximum session) for consumers.

The company did a market study that indicated substantial demand, but it remains to be seen.

However, there’s no reason that it can’t offer the service in other languages. Zhukovsky is realistic enough to want to try it out in Russian first, so he can understand the support issues. But if it works, it’s an ideal service to “export” over the Net.

The content can’t be copied, because each simulation is targeted to the individual.

It’s precisely this kind of personalization--rather than the practice of targeted advertising--that really creates value online.

Of course, it’s not all as easy as that. Though I am considering investing in Krasota, there are issues to resolve. If Krasota takes investors’ money, it will inevitably change the company culture. Zhukovsky will have to hire a chief financial officer, and he’ll have to set specific targets and meet them. He needs to move out of his current space, where his team of 11 sits as a project of Inforser, a larger Russian computer company with about 150 people.

What began as a little project with Zhukovsky’s sweat equity and a $50,000 investment may be about to grow up.

That’s exciting. What’s even more exciting is that Krasota Online’s example may also inspire other entrepreneurs.

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Esther Dyson edits the technology newsletter Release 1.0 and is the author of the best-selling book “Release 2.0.” Comments should be directed to Esther Dyson at edyson@edventure.com. Recent Release 3.0 columns are available at: http://161.35.110.226/release

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