The New Standards For Business Plans

Article by Herb Rubenstein,
President, The LEEEGH

Introduction

Today, business plans are funded at the rate of 1 in 1000.  How does a good business plan defeat these tough odds?  More importantly, how does an ongoing business write a business plan for these turbulent times?  Today, businesses are seeing their old models decimated by lack of demand for their bread and butter products.  The businesses try to change and adapt by changing services or cutting costs and benefits, all in search of new strategies and models. Success in today’s marketplace requires more planning than ever and this type of planning is the best way to clarify and test a company’s ideas. Business plans must be based on the reality of today and tomorrow, not yesterday.

This article lays out some of the basic tenets of business planning in turbulent times.  The business plan that your company has in the minds of its principals needs to withstand the business pressures of today.  Obtaining investors and loans in these dynamic times requires a solid business plans in writing, vetted by all key stakeholders.  Business planning does not guarantee success, but the lack of business planning almost certainly guarantees failure.

Research, Facts & Value

A business plan must be a well-researched, fact-based document.  Poor business plans make great leaps from assumptions to projections. Excellent business plans are based on voluminous data on the cost of every element of the service or product being offered. They identify exactly who the customers are and how much they’re expected to buy over the next several quarters or years. Good business plans include research findings on similar products and competitors in the industry.

Today, for new products and services to be successful, they must meet the 10x rule –as in ten times better than the current option. This 10x superiority must be demonstrable with facts and statistics.  A good business plan clearly details how the idea or service is proprietary and protectable through the intellectual property laws and trade secret policies, and how it will deter reverse engineering.

Competitive/Market Analysis

A good business plan must make predictions not only about its customer’s responses, but also about how competitors will respond to the company’s success.  Conclusions in your plan should be fact-based rather than assumption-based. The more citations to outside research, the better these conclusions will be. A good business plan must show the names and relative prices of competitive products and services, their size in the market, and other objective measures of their value. Include detailed and clear explanations of how your company’s offerings demonstrably meet the 10x rule.

Three Financial Scenarios

A good business plan will present three separate scenarios with potential financial results that show how the company will survive in worst-case scenarios. A good business plan will provide details of the management team’s dynamics, where it succeeds, and where there is room for improvement.  Rather than merely stating that there is a gap, a good business plan identifies who is responsible for filling the gap and how it will be done.

Sales and Marketing Costs and Revenues

On the sales side, a good business plan addresses what the projections are and why it expects to secure x amount of sales in y time.  Have other companies done this? A good business plan must take into account actual experience-based data on the sales cycle and the full cost of securing large clients.

It’s been said that selling anything to Fortune 500 companies in today’s business environment takes an estimated $100,000 in sales, marketing, and advertising.  We completely reject this idea. What it will take is a plan to develop a product or service that solves a very big challenge for the customer, Fortune 500 size or not.  Further, it will take the coordinated efforts of many individuals who need to have read a great playbook created by the company.  Otherwise, they simply will not know how they can fully contribute to creating these excellent products and services that companies, even those on the Fortune 500 list, will buy. The sales and costs projections in a business plan must reflect the reality of this new selling environment by providing realistic estimates of what it actually takes to market and close deals. The process isn’t cheap but it can be budgeted. These costs must be allocated from current revenue to insure that the money will be available when the opportunity arises to make that large sale.

Conclusion

This new reality of the business landscape may seem harsh, but getting the plan right the first time is essential.  An excellent business idea that is not backed by a solid plan with clear implementation procedures will simply waste time and other valuable resources.

These basic tenants of writing a good business plan will help your company make the critical distinctions that are needed in today’s tough business climate.

 

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