Platt Perspective on Business and Technology

Planning for and building the right business model 101 – 5: implementing a business plan 1

Posted in startups, strategy and planning by Timothy Platt on February 15, 2015

This is my fifth posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3, postings 499 and loosely following for Parts 1-4.)

I focused in Part 4 of this series on what we automatically assume as basic business axioms when setting up and running a new business – and how unexamined fundamental assumptions can create fundamental challenges and weaknesses in an otherwise potentially-successful new venture. My goal for this posting is to at least begin a discussion of implementing a business plan, following through on the basic assumptions that are made in it through systematic execution of its details.

Every new business founder, and more generally every business owner and leader brings a set of basic axiomatic business assumptions with them to the table. The details of their business plan, and of the overall business model that they pursue in building their new enterprise can be seen as here-and-now detailed, operational implementations of those assumptions. So this posting, is in many respects about operationalizing the basic assumptions and givens that are in place.

When I wrote Part 3, I at least briefly and in outline format noted the various sections that a complete and well organized business plan would include, listing them in an order that I have found effective as a baseline organizing model for such a document. Each of these document sections covers a specific and I add essential part of the overall planning and analysis that would go into developing a well-considered new business venture. And each and every one of them has at its foundation a set of functional area-specific underlying assumptions – that you need to know and understand, and that where possible you need to explicitly, consciously select. Here, one of the most important functions that a well drafted business plan can offer, is a clearer understanding of what you simply assume and take for granted, and the consequences of those axiomatic assumptions. The rest of a business plan is about acting on those assumptions operationally.

Let’s take that out of the abstract by at least briefly considering a few of the sections as listed in Part 3, that would be included in essentially any complete business plan. And I will at least somewhat arbitrarily select the first two sections that I listed there that would come immediately after the executive summary as this document is organized for release and use: the industry analysis and the market analysis sections. And I would also consider a section from much further down that list: the financial analysis.

• My brief description of the industry analysis section of this business plan outline was: an external focus on your competitive environment and on industry trends and the market environment.
• And my description of the market analysis there was: identifying and characterizing your competitors and their specific strengths and weaknesses, and gaps in what is being met where addressing them would create genuine value to potential customers.

And both of these sections carry within them a whole range of underlying assumptions, a few of which I will at least generically address here by posing a set of specific first-round analytical questions. I assume here that you want to set up a new business in an established industry and in established marketplaces, and that you fully intend to be effectively competitive there.

• How rapidly changing is this industry, and how much of that change primarily just represents more superficial and cosmetic change in what are offered as essentially established products and services?

Most new model changes in the automotive industry, by way of example, are primarily cosmetic even if every manufacturer makes visible changes in every model every year. Even a mature and primarily innovatively static industry can offer an ongoing flow of more cosmetic changes – and then be rocked by an unexpected and unprepared for disruptively new product offering from among its competitor businesses.

• How much of this change in fact represents the emergence of disruptively new products and services, disruptively new and more effective ways of producing products and services and bringing them to market, or both?

Here, a smaller but significantly recurring rate of disruptively new, can effectively make what seems to be a largely cosmetically-based and slowly evolving industry into a source of significant disruptively new competition, and both for established competitors in that industry and for new entries in it.

A market analysis would involve asking and answering questions like:

• What changes, cosmetic or disruptively new would make a positive difference for real-world consumers and buyers in real, analytically considered target markets, and what changes would find these buyers unaffected and uninterested?
• And how rapidly do the consumer participants in these markets accept and adapt to change and to purchasing and using the new, and particularly the disruptively new and different?

This last question, at least on one level, is primarily one of what proportion of the participants in a marketplace are likely to be earlier adaptors and what proportion are more likely to be late and lagging adaptors. As a first take on this, pioneer and early adaptors are more likely to be interested in the products and services of more fast-paced, rapidly evolving industries and their markets – and they are more likely to share word of them in their use of social media. And late adaptors are in many cases going to be more comfortable when considering products and services that are more settled and stable. But from an innovator business perspective, shaking up an up-to-now stable, mature and even staid industry with an unexpected disruptively new offering, can sometimes draw in new types of customer who are more early adaptor-oriented and innovation-comfortable too.

• How are these markets changing, if they are and how might they be encouraged to change and favorably for a new entry business in them?

Turning to consider the financial analysis section of this business plan, I will raise one possible question here. I have written repeatedly and recurringly about business finances and particularly about issues like burn rate and startup finances. And in that regard, I repeat my referral to an earlier series that addresses that complex of issues: Understanding and Navigating Burn Rate: a startup primer (see Startups and Early Stage Businesses, postings 67 and following for its Parts 1-12.) Businesses: startups and early stage ones included, also usually need to be able to secure lines of credit from banks where that can mean business account credit cards with sufficient credit limits to meet ongoing needs, mortgages for securing business space where that would need to be business-owned rather than rented, and other short and longer term financing support.

• Can this new venture secure a line of credit and if so, from where, at what levels, on what terms, and for what allowable and reasonable uses?

Where restrictions enter into this, some would come from the bank or other lending institution and some would of necessity come from the founding team as they make their own due diligence analyses as to what is reasonable and prudent, and necessary and with what priority and within what timeframe.

Questions such as the ones offered above carry underlying assumptions within them – always. And answers to them also carry assumptions within them – and also always. If you do not think through and at least seek to understand your assumptions in all of this, even what should be the right questions and I add the right answers to them are not going to offer you their full worth of potential value.

This posting is primarily about implementing a business plan, and much of what I have written above, could be similarly stated in the context of writing one. First of all, write your business plan so as to make it a workable blueprint that you can operationally execute from; write it to use it and then actively use it. But perhaps more to the point, keep asking and refining your key questions. Use that ongoing exercise to more fully keep track of what you are assuming and how what was reasonable to assume might lose that quality. And keep thinking beyond the business plan where that serves as a core, foundational starting point as you address new and unexpected challenges and opportunities.

I am going to turn in my next series installment to consider the issues of consistency and follow-through, and change and readjustment as you build from Day 1 from your business plan. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 3 and also at Page 1 and Page 2 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too.

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