What Nobody Tells You About Business Plans

This is the sixth and last post in a series that focus on showing you how to improve the prospects of successfully launching a business.

Traditional wisdom dictates that a business financing sequence goes as follows:

  1. Identify a perceived market need/issue.
  2. Craft a plan on how you might address the void.
  3. Present the plan to stakeholders (investors, key partners, etc.) to secure anticipated resources.
  4. Consume resources as you seek to prove your theory right.

Ok, for storytelling purposes the wording above is not the most positive, yet this exact phenomenon occurs over and over again every day in every industry.

The problem is that in today’s environment, unless your concern has a proven track record or you’re launching a ‘business format franchise’ concern the riskiness associated with ‘lets give it a shot’ is to high. So what are we to do?

Present the Evidence

The vast majority of business plans are equivalent to a house of cards. The cards in this case are the assumptions around the need, cost, sales volume, and market receptiveness. Just think about it, you have the profit projections stacked on top of executional assumptions, stacked on market assumptions. With this perspective it isn’t hard to imagine how one well meaning but misguided thought can cause an implosion.

The smarter move is to quantify the validity of the assumptions by exposing them to the market – in essence turning them into ‘quasi’ knowns – before using them to construct a plan. The gathered insights dramatically increase the odds of finding and following the right path. But more importantly, arms you with evidence that can be presented to stakeholders demonstrating the soundness of your concept.

Sounds Good, but How?

The how is not hard but beyond the scope of this post. I encourage you to checkout the books listed below. They will provide you with a better appreciation for this inverted business development process and give guidance on how to justify your case.

  • The Lean Start-up, Eric Ries
  • Business Model Generation, Alexander Osterwalder & Yves Pigneur
  • Four Steps to the Epiphany, Steven G. Blank

Have any comments? Your feedback is valuable.

Donald McMichacel teaches BE 261 Starting a Small Business.

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