Author: Tom Aranow, Harrington Daniels Advisors
I’m tired of reading business plans that are perfect in form and format but tell me almost nothing really important about why a proposed business is going to succeed in the real world.
There must be millions of dollars changing hands annually between prospective entrepreneurs, consultants and software developers who sell business plan outlines or formats, millions of dollars that are literally wasted on documents that serve no real business purpose.
Most of these “plans” follow a basic outline of topics that are generally recognized as fundamental to any business venture -- describe your product, provide a budget, list your competitors, etc. The problem is that creating a real business plan is not about filling out a form or plugging in figures or writing a “to do” list so that a banker who wants to sell a business loan or a consultant can say there is a plan on file. The true benefit of a business plan is in the ability of the writer to convince investors that the plan will work and achieve the goals and successes that it proposes. It can also be a useful tool in forcing an entrepreneur to recognize and account for the brutal realities of the marketplace. It’s not enough to say you will succeed; you need to explain why your product or service is better than the competition’s and how you’re going to get customers to understand that and buy from you instead of a their current supplier.
Demonstrate success
Consider a plan that says a new company will sell $750,000 worth of product in the first year on an advertising budget of $10,000, and that sales can be expected to grow by 20 percent per year. That’s all well and good, but how is $10,000 worth of advertising going to produce $750,000 worth of sales? Why can growth be expected to be 20 percent? Is the product just that good that everyone will magically know about it and want it?
To entrepreneurs who provide us or their banks with such plans, we would say that the goals of breaking into the national market, becoming a “leader in the industry,” achieving phenomenal sales in the first year, growing by an amazing percentage each year and paying down the original line of credit to zero in two years are aggressive and show determination and vision. Now, support them with evidence; provide us with an argument as to why your product will experience so much demand and how your marketing strategy will achieve those results. Answer the key question, “Why will this work?” instead of “What will you to do?”
We’re not suggesting that entrepreneurs stop writing business plans. We’re suggesting that they write plans that matter. Every plan should be a well-informed argument. In the development of those arguments, prospective business owners and their consultants should be forced to test or “vet” their own notions of what it will really take to be successful. In the process of defending those arguments, they should be challenged to truly account for the talents, skills and financial resources they will need and the risks, obstacles and frustrations they will need to overcome.
Tom Aranow has over 30 years of executive management and entrepreneurial experience in a variety of industries and is the author of over 35 published articles and essays on best practices in business and not for profit management. He is the Senior Advisor for Business Strategies at Harrington Daniels Advisors, in Grafton, and Kohls Group Consulting in Pewaukee, he can be reached at 262-376-9507 or by email at tom@hdadvisors.com
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