The Art of Business Plans

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One of the questions entrepreneurs often ask us in the Ignition Centre is: “We need a business plan. Can you write it for us?”. The short answer to that is a simple: “Absolutely not!”. The longer answer is a bit more complex and I’ll try to answer that in this article.

First of all, why do you need a business plan? Many highly successful entrepreneurs will tell you that they started their business without a formal business plan. The only company I was ever involved in that started with a business plan was an abysmal failure and cost me a bundle of money. Several others, with no plan in place, did very nicely. So why do banks need to see a business plan before they will provide a business with start-up funds? Why will no government agency provide you with a grant without seeing a business plan?

The place to look for an answer is by carefully observing how experienced and successful investors in start-up businesses (venture capitalists or angel investors) go about choosing where to place their money. If you get a chance to sit in on their investment decisions, you will hear them say things like: “It’s not about the
plan, it’s about the planning” or “It’s not about the plan, it’s about the people behind the plan”. I think Dwight D. Eisenhower summed it up best when he said many years ago: “The plan is useless; it’s the planning that’s important.”

What experienced investors are really interested in is to verify that you have you gone through all the necessary steps in thinking through your business. We all know Murphy’s Law: “If anything can go wrong, it will”. This is particularly true in start-up businesses. Have you considered all the options? Covered all the bases? Have you done a reality check on your assumptions? Do you have contingencies in place for all those things that are going to pack out differently than you thought they would?

What banks and government agencies and investors are really after is not a business plan but proof that thorough planning and thinking has taken place, that it’s realistic, and that it has covered the many aspects relevant to starting a new business. Can a consultant do that for you? Of course not. No consultant will run your business for you. No one knows your business like you do.

So if we can’t do the planning for you, how can TSiBA’s Ignition Centre help you get started with your business plan? First and foremost, we can steer you in the right direction. That has become a lot easier recently with the publication of a book that has very quickly become the “Bible” of business planning. It’s called: “Business Model Generation: A Handbook for Visionaries, Game Changers and Challengers” and is written by Alexander Osterwalder and Yves Pigneur. It has also been co-edited by literally hundreds of entrepreneurs who have started their own businesses and have been through it all. Don’t be put off by the pompous title. The basics are as true for the Richard Bransons of the world as they are for those of us starting a hair salon or a gardening service in Khayelitsha.

The authors boil the planning down to 9 essential questions that every entrepreneur must ask herself before starting a business. That’s it, no more no less. Think about them as the 9 building blocks of your business. If you have thought deeply about the answers to those questions, then you are ready to start your business. And, if you do need a business plan from a bank or another organization, you are then ready to write it and ready to ask for help from our Ignition Centre. So please don’t spend thousands of rands (or government vouchers) on getting a consultant to do your planning for you. The plan won’t help you run your business and it won’t get you funded. It will not be worth the paper it’s written on.

The book is a lot cheaper and leads you to ask and answer the right questions. As a bonus, it’s very well written and beautifully illustrated. It doesn’t require a MBA and doesn’t read like a business text book at all. The end result of the process is what the authors call a “business canvas” that literally “paints” a complete picture of your business. Who ever thought business planning was as much art as it is science? In future articles, I will go into detail into each of the 9 basic elements of a robust planning process. I will use a concrete example so you can see how this works where it really matters: in the real world.

To give you a little taste of what’s coming, here are the questions we will be asking (and answering). Don’t let the big words scare you off. We will chop them down to size.

Customer Segments: For whom are we creating value? Who are our most important customers, clients, or users?

Value Proposition: What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? Which job are we helping the customer get done? Which customer needs are we satisfying? What bundles of products and services are we offering to each Customer Segment?

Distribution Channels: Through which Channels do our Customer Segments want to be reached? How are we reaching them now? How are our Channels integrated? Which ones work best? Which ones are most cost-efficient? How are we integrating them with customer routines?

Customer Relationships: What type of relationship does each of our Customer Segments expect us to establish and maintain with them? Which ones have we established? How costly are they? How are they integrated with the rest of our business model?

Revenue Streams: For what value are our customers really willing to pay? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues in terms of percentages of the total?

Key Resources: What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams?

Key Activities: What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams?

Key Partnerships: Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform for us?

Cost Structure: What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

If you can’t wait until I’ve finished all nine articles, then go to your local bookstore or library to pick up a copy. After you have done your homework call (021 532 2750) or email Sonja Hagins (.(JavaScript must be enabled to view this email address)) for an appointment so that we can discuss in detail how we can help. And no, we won’t do your planning for you! Nor will we charge you an arm and a leg for a business plan that is worthless to your business.

Allow me one final comment: The process the authors depict is just as valuable for a running business that wants to get ahead, as it is to a start-up company.

Peter Kraan

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