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Thread: No more business plans please!

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    Silver Member Vincent's Avatar
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    No more business plans please!

    No more business plans please! Keep your plans short and simple

    “The 20th Century business model - constructed around hierarchy and five-year business plans - won't work for the new millennium,” Kingsland, chairman of the Association of Business Psychologists (ABP) in the United Kingdom.

    A few days ago, I was talking to a friend and we were discussing business plans, specifically the one he used to submit to buy his business. I asked him to show it to me and it took him about twenty minutes just to find the plan.

    He dusted the cover off and proclaimed, “Proud words on a dusty shelf,” referring to Ken Hensley's album of the same name.

    Handing it over to me he said, “You know Vince, I've never looked at that plan since I got my business up and running. In fact, the only time I glanced at it was when it was returned to me. The strangest part was when I re-examined the plan, I found that some of the financials were out and my competitors’ analysis was off base. One day I will sort it out.”

    I asked him, “If you don't consult your plan periodically. What do you do?”

    “I may not have a 'business plan' but I certainly plan. The one thing that I've have learnt is implement one or two marketing ideas (or whatever it is you need to do), and stick with it for a time and then change. It's easier to look after two game plans that say five or six. For example, my shop on the forecourt suffers in winter, sales drop off slightly, but I know that people need gas for their heaters. Before the winter period, I negotiate with the suppliers for a better rate. I then guarantee the supplier that I will take one hundred gas bottles per week for the winter. The saving I get from the supplier I pass onto the customer. This has a knock on effect. It makes my gas the cheapest in the area, which brings in the customer who spends more in the store. You can say that I use the gas as a loss leader.”

    “You can't do it every winter,” I said, “your competitors will start doing the same, so you're going to have to be one step ahead.”

    “But I do. The one thing I do is look to other industries for ideas, but that's another discussion we can have.”

    Walking back to my car I thought. Plans don't have to be formally written. Writing down your ideas on an A4 sheet of paper or creating a mind map will suffice; something that will take an hour or two to complete. What is more important is acting upon them, making them become a reality. Output is more important than the input, ie writing the business plan. Plans should be simple and uncomplicated, not heavy-handed that weighs you down. There should be no need to produce a 50-page document for a five-year horizon, which in most cases won't be read. Short actions plans, that is key.

    Daily we read and hear on the importance of business plans. We are told a business plan can be compared to a road map. It shows you where you are, where you want to go, and what resources you will need to get there. The purpose of a business plan is twofold. Firstly, it can help you obtain finance and, secondly, it explains to you and to the financiers what, why, when, where and how you intend to run your business. It will also help clarify why you believe the business venture is viable, and is a guide to achieving your goals. If this all so true why do so many businesses fail?

    The world of entrepreneurship is flooded with information on business plans. A Google search for "Business Plans,” and “Business plan" recently revealed over 2.8 million and over 23.6 million pages respectively, from free business plans templates to sophisticated software packages that will help one design the ultimate business plan. Today writing a business plan is undoubtedly the most extensively used teaching tool in entrepreneurship learning and preparation. With so many plans available surely the success rate of the business should be higher than the 15% that succeed. Unfortunately, a good template will neither make for good content, nor automatically make a workable or successful business. (The technology crash in Silicon Valley can attest to this, great business plans, but little else except greed.)

    Business Planning is critical for success! Business plans may not be.


    So is there an answer to an alternative business plan? I believe there is...
    Let’s hear from you
    Vincent Marino
    Maximising the sales value of your business!

    Business 24-Seven |MyBlog Twitter |facebook |Phat feesh & chips






  2. #2
    Site Caretaker Dave A's Avatar
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    A great post! And I have to agree - simple is best.

    I think this is my basic cycle, without using words like differentiation, optimisation and the like.

    This is the need.
    This is my solution.
    This is my competitive edge.
    This is my cap-ex.
    This is my cost.
    This is my price.
    Take it to the market.
    Some people buy.
    Refine.

    Hmm. Is there a short word for "competitive"?
    The trouble with opportunity is it normally comes dressed up as work.

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    just me duncan drennan's Avatar
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    I think one of the problems with business plans is that there is a whole formal industry structured around creating a business plan that will get you money.

    Let's face it, most people write business plans to get money, not to plan their business.

    The business plan industry has kind of played a trick on people to make them believe that a great formal business plan will ensure that they are going to get money. For those of you who don't know it yet, banks don't care too much about how viable your business is, just your personal ability to pay back the loan, i.e. assets and potential for future earnings (if you business goes south).

    On the other hand venture capitalists and so on are looking for the safest way to create a return for their investors. Angel investors are a bit less predictable, but I guess they probably have a specific interest in certain areas, and they will approach you rather than the other way around.
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    Silver Member Vincent's Avatar
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    About two years when I started researching this topic for my book, it was interesting to note that there weren't that many topics on the net discussing 'why business plans don't work.' A Google search at the time resulted in about 100 hits. Today there's 10 times more, although most (60 - 80%) of the articles are a copy and past of the widely quoted paper by Michael Clark, 'why business plans don't work - and what to do about them.'

    Since the release of the research paper by Babson College alums that graduated between 1985 and 2003 found that “…there is no compelling reason to write a detailed business plan before opening a new business.” The analysis also uncovered that there was no disparity or distinction between “the performance of new businesses launched with or without written business plans.” The stats from this paper are also being introduced onto the net. (somewhere on this forum I read a post about Guy Kawasaki)

    Here is some info not readily found on the net. Research conducted in America by Dr. Stephen Perry who surveyed 152 failed and 152 non-failed small businesses in 1997 found that 64 percent of the non-failed businesses had no written business plan. Although the research found that non-failed businesses had more extensive written plans than failed businesses, 23 percent compared to 9 percent, respectively.

    A 1993 AT&T Small Business Study found that 59 percent of small businesses that grew over the previous two years used a formal business plan. A 1994 survey of the country’s fastest growing companies found 23 percent lacked a business plan. Interviews of 100 founders of companies on 1989s “INC 500” list of fastest growing private companies in the U.S. found only 28 percent had comprehensive business plans.


    The results of the above studies and surveys are all across the board and don’t demonstrate or establish anything of significant importance. What it does seem to suggest is that a large percentage of successful businesses do not have written business plans. Unfortunately none of these studies disclose the nature of the action that created the plan.

    Some food for thought
    Vincent Marino
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    Silver Member Vincent's Avatar
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    Dave, Duncan thanks for the input. I may just quote you guys in my book, if you don't mind.
    Vincent Marino
    Maximising the sales value of your business!

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    Site Caretaker Dave A's Avatar
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    You know what the real problem is? At the end of the day your exact result might be an accumulation of a whole horde of factors, but when you get down to the nitty gritty in a successful company, it's normally only one or two things that account for the bulk of that success.

    When I was a one man show, it was when I added one line on my business card that things started to really hop. The direct contact marketing strategy and dependable service was always there. One line took me over the top.

    I think it was in "Good to great" that you could see this in a big way too. In Jim Collins' interveiws of the CEOs, I really couldn't help notice how often they were saying something along the lines of "At the end of the day, we did this (one) thing right."

    Yes, you've got to do the basics. At the end of the day you do need to understand your market and how you satisfy their need and all the other basics.
    But normally it's one differentiator that'll produce the big swing in your results.
    The trouble with opportunity is it normally comes dressed up as work.

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    Stephen Covey's quote is very relevant:

    "The main thing is to keep the main thing the main thing."

    Which means focus, focus, focus ...

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    Silver Member Vincent's Avatar
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    Today business plans are more in tune to what we would like the outcome of our business to be, a vision and mission of how to accomplish what we plan to do. A business plan like a vision statement defines what it wants to be, where the organisation wants to be in the future, reflecting the optimistic view of the organisation's future making it is a source of inspiration to all stakeholders. In essences it concentrates on the future of the business.

    A mission statement defines where the organisation is going now, primarily describing the purpose and why your particular organisation exists. It concentrates on the present; it defines the customer(s), critical processes and it informs you about the desired level of performance. (thanks to Wikipedia for some info)

    Any suggestions or comments!!
    Vincent Marino
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  9. #9
    Silver Member Vincent's Avatar
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    Adding to what Duncan said. I believe the biggest offenders are business plan software programs that churn out cookie cutting documents. People have became a copy, cut and paste nation, all believing that they have the ultimate business plan.
    Vincent Marino
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    Full Member Ann Williams's Avatar
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    Cool

    Quote Originally Posted by dsd View Post
    I think one of the problems with business plans is that there is a whole formal industry structured around creating a business plan that will get you money.

    Let's face it, most people write business plans to get money, not to plan their business.

    The business plan industry has kind of played a trick on people to make them believe that a great formal business plan will ensure that they are going to get money. For those of you who don't know it yet, banks don't care too much about how viable your business is, just your personal ability to pay back the loan, i.e. assets and potential for future earnings (if you business goes south).
    Duncan, this is so true! I looked at the business plan guidelines given on the various bank websites and was quite surprised by just how little attention is paid to the actual feasibility of the business.

    Anyone who thinks that the bank is out to truly assist you in your business is wearing rose tinted spectacles. That joyful plunge into the entrepreneurial fray could just cost you your home, your savings, and everything else that can be sold off. (Because the bank will come after you if you default; they aren't your kindly uncle.)

    So, although one may need to write a 'business plan' (ie. pretty much a list of your assests that are up for grabs if you hit a rough patch) for the bank/s, it's probably a good idea to do some scenario planning (vs a formal business plan) as to what could happen under different circumstances.

    What I am thinking here is Clem Sunter style 'High Road, Low Road' scenarios where you ask some very brutal questions about the real feasibilty of the business - and then repeat this process on a regular basis as well as for new projects.
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