Creating a winning business plan demands a mixture of precise business thinking, art, timing and luck. You need business planning skills and these can be learned. Many excellent books and courses can help you develop a business plan. But creating a business plan that stands out from the crowd, a winning plan, takes more, and achieving this target takes experience- no way of getting around this. Many talented professionals have their business plan preferences and I have my own which I have fine-tuned working with scores of new ventures. Based on my experience, while there are never any guarantees, here are 10 tips to improve your chances for creating a winning new business plan:
1. Maintain a “market and opportunity” focus and view technology as an enabler. Don’t be seduced with what I call “gee-whiz” technology. Define a tight, focused opportunity with a well-defined target market- technology may be the enabler used to create the business. Suppose you develop a new wireless device and your plan proposes new wireless service for monitoring patient data- the business addresses a real, quantifiable market opportunity. Compare this to an opportunity for a new proprietary wireless data monitoring technology. In today’s highly competitive market, specific, well- defined, opportunity-driven ventures are preferable to pure technology plays.
2. Understand the Difference Between Feature, Function and Benefit Image transmission is a function. Moving high resolution images via telephone lines is a feature. The ability to send a high resolution image in 5 seconds via a telephone line using a $99 device is a benefit. Sell benefits and make this the cornerstone of your plan.
3. Use the “So-What” Tool To Define Your Target Opportunity A very important management tool and not used as often as it should be for new venture development. A simplified “so-what” analysis goes something like this. Our new service offers a unique encrypted data solution for e- commerce applications. So what? We can provide authentication using voice recognition. So what? Our voice authentication technology instantly identifies buyers’ interests and demographic profiles. So what? We can identify and route e- commerce customers based on voice response and past history. The results? Using the “so what” tool, we refocused our thinking to create a more unique, defensible business opportunity.
4. Reinforce Your Assumptions Using Sensitivity Analysis Tools You need to ‘exercise’ your financial model, examine “what-ifs” and boundary conditions. Reduce sales and/or increase costs by 10, 20, 50, 80 percent-what happens? Delay product launch plans, reduce competitors’ costs by the same amount-how do these impact ROI and total cash needs? Formal analysis tools exist to complete these analyses.Properly done, these analyses show that you understand your market, business, elasticities and sensitivities. This is a “must-do” in any business plan effort I am involved with and find this shows you understand your business.
5. Appoint An Advisory Board Develop a “hands-on” Advisory Board. Carve out roles and responsibilities. Provide incentives, typically options, vested based on time served and milestones achieved. Powerful, well-known names and impressive marquees may look great, but you need contributors who can help you move the business forward. Again another “must-do” in any business plan effort I am involved with- high upside with minimal investment. I also serve on these Boards where needed.
6. Develop Strategic Alliances Same points as for Advisory Boards. Developing marketing alliances with GE, IBM and others sound impressive, but make sure there is defensible substance here. Are there any revenue guarantees? What resources have your partners committed to the venture? Any joint promotion plans among their customer bases? Often, targeted alliances with smaller firms may provide more strategic or revenue benefit.
7. Don’t Believe In “The Sanctity of the Business Plan” Another important concept. The completed business plan looks impressive; bound, laser-printed, color charts, and maybe 200 to 300 hours to prepare- sure looks and feels like a finished product. The reality is this document is probably out-of-date before the ink is dry. The plan is only the starting point, a work-in- progress, showing what your team is thinking, assumptions, strategies and projected results. These will tested, attacked by investors and others, defended and changed as your business proceeds. A hard lesson sometimes for those investing more than 200 hours in developing a business plan, but that is reality. There is no sanctity of the Business Plan- as you progress, you will create a revised plan. Revising always adds value and is the norm.
8. Adapt to Change To Avoid the Icarus Paradox In strategic management courses, we relate the story of the fabled Icarus from Greek mythology. Icarus’ greatest asset were wings of feathers and wax that let him soar higher and higher closer to the sun. He kept going to the sun, ignored his father’s warnings about getting too close, the wax wings melted and he crashed and burned. This is often used to explain management failures such as pursuing a single-minded business strategy even in the face of disaster, management hubris, and also believing that achieving great past success ensures future success. (it doesn’t). Avoiding the Icarus Paradox means that new business “trajectories” must be examined, refocused and assumptions tested even when performance is strong.
9. Emphasize Precision Don’t say you are addressing a large, growing market for ‘gizmos’. Instead say “… the market for ‘gizmos’ is $20 million in 2011, increasing to $35 million by 2013.” Specificity and quantitative precision shows clarity of thinking and understanding of your market and business. And also improves your ability to secure funding. In my recent book, I shared similar examples of what I call “fuzzy thinking” and how these can be improved. If you have the “fuzzy thinking” affliction, I recommend focus on tightening your thinking- this skill can be learned.
10. Conduct Business Operations Frugally Running out of cash and inability to secure new funding is most often cited as the reason new ventures fail. However, studies show that ventures funded with minimal capital have a higher probability of success, which I am sure will surprise many readers. The fact is a “frugal” investment structure demands tight management and strong financial controls at the outset. The message here is to tightly define cash needs, operate frugally, particularly in the early months, and demonstrate that you know how to manage cash and resources to win. Achieving this objective often smooths the path to secure new funding.
Entrepreneurs know there are plenty of minefields and absolutely no guarantees in the entrepreneurial world. Follow the above guidelines however and you may improve your probability of creating a winning business plan.
Paul B. Silverman is the author of a new entrepreneurial management strategy book Worm on a Chopstick: Understanding Today’s Entrepreneurial Age: Directions, Strategies, Management Perspectives. A seasoned entrepreneur, global management executive, public and private company CEO, educator, management consultant, speaker, and former founding Director of the Entrepreneurial Step Up Program at George Mason University targeting CEOs of early stage high growth companies, the author is well known in the global information industry and venture community. The author has conducted hundreds of presentations worldwide and published many articles addressing management strategy, policy and new business development issues. The author serves as CEO of Sante Corporation, an early stage personal health care management company developing a new vision to improve today’s health care system; Managing Partner Gemini Business Group, LLC; and serves as adjunct professor in the Center for Entrepreneurial Excellence Program (“CFEE”) in the George Washington University School of Business.