The sense and nonsense of business plans

Review by entrepreneur coach GmbH
Standard business plans usually disappear in a drawer. Why is that and how to plan better!

The starting point
In the last 10 to 15 years – supported by banks, business plan competitions, award money funding guidelines and requirements for start-up grants – forced enforced business plans for start-ups. needed at least for the start-ups, the external capital. The number of bankruptcies is – despite a decline this year – rather increased. I.e. on the factual-objective side of the business benefits of such plans is hardly so overwhelming that he would have made statistically significant improvements.

On the subjective side, what most would-be self-employed and entrepreneurs more difficult – except perhaps those are commercial with a background. Many people are naive question why they should move numbers back and forth, if they do not yet know whether the product being offered is heading at all in the expected range. And they are right!

Ultimately generates therefore a false sense of security that does not exist in reality. To avoid misunderstanding: of course a classic business plan contains more than just figures. He usually contain sections on business and team, product and service, market and competition, marketing & sales and financial planning, sometimes a risk analysis.

But, and this is the crucial starting point for the following post: The intended reader for the business plan is not the contractor or its employees who want to know what to do and it need a plan, but the targeted reader is a banker, an investor, a gatekeeper for research funds and grants. And therefore the average business plan is also aimed to complete their numerical expectations.

The problems

Change depending on the target group were also the interests and thus the contents. The essential interest of the readers of a business plan, that of investors, is to recover the invested capital at the lowest possible risk with the highest possible return. From the perspective of investors, so the main purpose of a company to increase capital. This puts them, however (as many management theorists (Malik, printers, Mewes) and handed in my posts (http://www.unternehmercoach.com/unternehmer-coaching/articlelist_a_11_unternehmer-tipps-fachartikel.htm) run several times ) is false: The only () The purpose of a company is to offer its customers the greatest possible benefit.

To illustrate what this means for a business plan are highlighted below some of the problems spotlighted here.

– A business plan supports the wrong strategy. Investors who read a business plan want the high return and low risk. Both are best achieved when the market promises high growth potential and as large as possible. To express it in numbers: A VC / private equity investor with an expected increase in value by a factor of 40 to 100 in 5 years. To make this business plan to make plausible the market needs to have really large. Accordingly, we read in all business plans, and how great the market is huge. The problem is that the market is large and there is a small fish swimming around a few more sharks. By looking at the strategy of the Hidden Champions, that is under investigation by Hermann Simon German world market leaders, then this is exactly the opposite: companies have when they were little, markets create jobs, which were tailored to their strengths. The strategy, then, as quickly as possible to become the market leader in a very small market and grow from this secure base. When you address your business plan but in a tiny market, you have no capital.

– A business plan, the attention focused in the wrong direction. There are basically two ways a company can accrue funds. Either through investors or customers. Both want to be pampered. It is the investor not only a unique creation of a business plan, but to permanent coverage, plan adaptation, possibly even voice, etc. The problem: During the period in which you deal with investors, you can not deal with customers. Since the purpose of a company to offer its customers benefit, so you deal in time where you take care of the investors, not just with the purpose of the company. In the long run, however, always the entrepreneur will be beneficial, which is more concerned with its customers and its target group. This is incidentally also confirmed many statistically.

– A company is a dynamic organism. While it is useful to develop very long-term strategies, a lot will turn out differently than planned and it may prove necessary in the short term to follow a completely different way. The investor wants to know or not but take note. He wants the lowest possible risk. Possible, continuous and predictable patterns make him happy – a world without Excel would be a worse place for investors. The risk-sections in business plans are usually only meant to reassure investors: Yes, we have considered and the risks under control. If you are a contractor on the “absolutely absurd” idea, the business plan should be pointed out that things can turn out differently, you get the standard reply: Please revise its approach yet again. Or if you in your business plan even an item for unforeseen risks (or opportunities) schedule, you painted this as the first again. The fiction of safety (but it is black and white in the business plan!) Is the investor rather than the open and realistic management of opportunities and risks.

Ultimately you have to say that the addressee of a business plan was very much about investing and practical finance plans, but usually understand anything about business management. This is because they are not entrepreneurs.

The result of such an alignment of business plans on the risk and return expectations of investors: Anyone who reads a business plan, do not know how the company will eventually look like. What does the company? What are the relationships? How to work together in the company?

Anyone who reads a business plan knows not what to do. How is starting to build the company? As the innovation driven? What criteria staff will be hired? As processes are developed and tested?

And who reads a business plan, do not know what to do when reality is different. And it is always different. What is the systematic plan for managing opportunities and risks? Which reserves may be used as under what conditions?

Looking at a map for example an architect and then not know how the house should look like or how the walls should be built, then nothing good for the plan. Not even when the bottom right is the exact price for the house construction. So it is with the business plans. And because most entrepreneurs imagine this intuitively, the plans disappear after being drawn in the drawers and then are never seen again.

Better ways

To avoid misunderstanding: It is not about to abandon the plan, but it’s about to be planned so that the relevant actors, namely to work the business and its employees with the plan.

It is about the question should look like a plan, which aims to create a company that serves its purpose. So the customer provides benefits, not the investors a return. (And to avoid a misunderstanding: I have nothing to return if the company offers its customers a better value results, this anyway I think only the primary focus of action on the return is wrong, because the purpose of a company in line.. ).

What is important to plan and how? Here are some suggestions which elements in a plan for entrepreneurs and employees should be included:

– Small target group. The nuts and bolts of the strategy as quickly as possible to become the market leader. You need a small market. The size of the market should be about so that you could cover with your current performance around 5 to 10 percent of the market. That is your (!) Market. There you will have to be better than everyone else. And in your plan you should describe the instruments with which the permanent customer communication, you will secure it. Customer communication is not unilateral, but more important is the question how to capture customer needs and permanent record.

– Clear benefit. What is clear, compelling and distinct benefits you offer your target audience. What do you do to ensure that these benefits are in 3 or 5 years more convincing than it is today? What do you do to position itself in the minds of your target audience? How do you measure that? And what resources (money and especially time), make available for it?

– Vision, values and guiding principles. Often neglected or done wrong. A vision is not to have in 5 years, 50 or 500 or 5,000 employees. A vision is not even 1 million to make 10 million or 100 million in sales. First, it is totally devoid of content and 10 million are nothing more than 100 million, as long as you do not have a picture in your mind what you want to do with it. Second, and essential: It is the main person in your company, that your customers do not care! A vision was e.g. Microsoft: “A computer in every living room or at Kennedy:” Before the end of the decade to land men on the moon. ” A vision is as wide and emotional mission statement that says something to the customer and offers practical planning for a guide. Even more important is the question of values and guiding principles – just before starting a business. A functioning organization requires a uniform orientation. You can not do by regulating every detail (such as this is our 69 000 German laws and regulations), but by reason, there are few binding rules of behavior. Take care not at first, then you will almost never make it later to install a uniform culture. This continues as cancer. In vision, values and leadership principles you must also answer the question by what mechanisms they will ensure that they are effective and lived with it.

– Renting a permanent improvement. A company is not static. You can constantly improve. Do not do it, then there is the competition. But: Most of the ideas arise in their daily work. So after creating the plan. How will you incorporate these ideas into your company? What criteria do you decide on the implementation of ideas? What resources (money and especially time) to book for such improvements? Who is responsible and who decides?

– Growth strategy. This is not a question of how much you have more next year than this year’s account. It is about the question of how the energy created by the power to attract your customers want, into growth. On the biological level, there are different models of growth: cell division, cell growth, reproduction, etc. In business, there is also this: Do you want easily accessible, only bigger (and then restructure the time)? Or reproduce the same large units through franchising? Or do you prefer a fractal division process? And as you organize your inner growth cancer-free – ie, with a focus on common values and norms of behavior? How do you attract the best employees and how to integrate new employees into your organization? And also: What do you do not have the right to get rid of and what are the criteria for it?

– Company-wide planning and implementation. So far, we moved at the level of concepts, visions, values and strategies. How to get the HP to the ground? What planning procedure to install? Year plans? Monthly plans? Week plans? What do you do to make all the plans and key objectives are clear? How to control or support you in implementation? How do you measure or check permanently the achievement?

– Break points and measures. Things are often different than planned. This does not speak against the business start up plans, but for some few basic rules to define deviations. The amount of times the monthly sales will be covered for such discrepancies as a reserve? As these reserves be established? Conditions under which these reserves may be touched and which accompanying measures are put in motion when contacting too restrictive? What mechanisms will be installed to ensure compliance with these rules?

– Personal and management development. This is the absolutely crucial point that is almost never taken into account, however. The main engine of a company is the contractor. However, the converse is also true: the main bottleneck is also a company of entrepreneurs. The more a company develops, the more change, the demands on an entrepreneur. Anyone who starts out as a great graphic designer, architect or accountant is, at the latest at 5 to 25 employees on the nose when he has not learned a lot in the meantime. This involves expertise e.g. on strategy development and marketing in order skills such as Self-management or dealing with staff and new settings, such as a stronger focus on vision instead of “urgent” outside influences. Even dealing with crisis situations must be learned first: How do you manage to sleep well, knowing that a project has run completely out of control or that mature in 3 months, a loan repayment of half a million and is one penny has in the bag? In fact, my job is not known which provides such comprehensive requirements for their own development, such as the entrepreneur. And that should be planned. If you only want to learn self-management skills if you are already working 90 hours per week, you can forget it. Then, you are no more time for it. So, what requirements come in the next 5 years to you as an entrepreneur? How do you have to change (in knowledge, skills and attitudes) in order to meet these requirements? Which means you use to change a (seminars, books, business coach, feedback, mentoring, etc.)? What resources (money and especially time) provide for it? How you can be sure that the personal development, even in turbulent times, does not fall under the table? At the point of personal development, a notice is, because he does not seem urgent and almost always goes in everyday life: It is not a nice “nice-to-have” but a question of your existence. If your business grows, you have two options: either you grow and succeed or you grow your business over your head and you go under.

With these suggestions, you can create a plan that offers you and your staff for working on your business the necessary foundations and guidelines.

Of course, you need to be clear: With such a plan, you can indeed start to run a business, but you get no capital. If you need outside capital, you do so, unfortunately, two plans. In order not to burden with unnecessary work, you should first create the plan for the development of your business. And then hire a founding consultant who builds it into something with which banks and investors are satisfied. And you deal with the second plan only to the extent that it can credibly present! But you never make the mistake of believing in it 😉