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Before the Business Plan Gets Written

A few steps before you write your next business plan

computer_keyboardThe other day a friend asked me if I had any business plan templates.  Of course I have many plans that could be used as a template and there some good websites with information on how to build a business plan.  Instead, however,  I invited him for a coffee to learn more about why he wanted to make a plan.  It turns out that my friend was entertaining the idea of starting a business.  Like many good entrepreneurs, he had several good ideas, he was not sure how they fit together, he was excited, and he was scared.  He had a potential partner, also good, and most of his business ideas could be done without external investment– perfect.

I then outlined a template to help form his ideas that looked like this for each idea:

  • What is the business need in the market that needs solving?
  • How are you (and your company) uniquely qualified to solve this?
  • How will you identify such customers and how will you make contact with them?

His immediate comment was  “I am not sure about some of these answers, should I makes guesses or leave them blank?”  I asked him to make guesses and then we went through each business idea area and tried to answer some more questions:

  • What is the biggest risk that is not known?
  • How can it be tested quickly and on a small scale?

When I talk to Software Engineers, they tell me the technique I am using is called “Iterative Development”.  It is a series of cycles that target the highest risk areas.  I use cycles leading up to a formal business plans, then more cycles as we discover the basic customer value and customer profile.  Then if we continue to invest, the product or offering needs initial descriptions, first beta-customers, and a more refined sales-value plan.  Cycles typically take weeks, but the entire process takes years.

Compare this to a more conventional Gartner research based business planning process.  Budgets are set (almost always too limited for sales and marketing at the end), customer value is pre-determined, pricing models are prepared, and the full sales machine rolls out with the first product.  Another naive approach is the total opposite.  Nothing is planned more than a week at a time.  Production people produce, sales people visit customers, and nature takes its course.  In my opinion, these alternative approaches suffer from being over regimented or under disciplined respectively.

My advice, use a plan-test-replan iterative cycle to launch a new idea.  Find that balance between reacting to the market and holding discipline toward a goal.

Update February 2014: Lean Startup & Business/Lean Canvas now formalize the concepts described in this blog entry in 2009– lot’s of information is now available.

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