John Mullins and Randy Komisar. Getting to Plan B

 

The book Getting to Plan B: Breaking through to a better business model, written by John Mullins and Randy Komisar, contains several important lessons, primarily for start-up entrepreneurs, on developing successful business models. Though very repetitive around a few key ideas, the book is well worth reading especially for those who want to better understand how the business model is reflected in the different financial statements. with interesting examples from: Amazon, Apple, Celtel, Costco, Dow Jones & Company, eBay, GlobalGiving, GO airlines, Google, Oberoi Hotels, Pantaloon, Patagonia, Ryanair, Shanda, Silverglide, Skype, Southwest Airlines, Toyota, Walmart, Zara and ZoomSystems.

The book in three bullet points:

The business model concept is in the book defined as the pattern of economic activity comprising of five key elements that together determines the viability of any business. The five key elements being the revenue model, the gross margin model, the operating model, the working capital model and the investment model. Companies are successful when the five elements work together.

Getting to Plan B is about the process of discovering a business model that works, with the assumption that the initial plan is most often wrong. The discovering process can be made systematic by constantly formulating different hypothesis and measurements and continuously follow up and iterate the business model into a new Plan B.

The starting point for a new business model is to learn from successful examples worth mimicking in some way and examples to which you explicitly choose to do things differently, where the ultimate judge is the customers and the cash flow generated from your business model.

A brief summary of the different chapters:

1. Don't reinvent the wheel, make it better - the concepts of analogs (successful predecessors), antilogs (predecessors that you want to differ from), and Leaps of Faith (beliefs about answers with no evidence) is covered with the key take out to learn, mix and match to create your own business model, to experiment to test different hypothesis to prove or refute them.

2. Guiding your flight progress - the concept of dashboarding (a systematic way to guide experiments and track results) is presented with examples showing that measuring of specific parameters or results increases the focus of the company's activities, and that the dashboards, including parameters and goals, need to evolve over time based on the learnings they uncover.

3. Air, food and water - the chapter, focusing on revenue models, hits home two important points: the importance of resolving customer pain or providing customer delight, and the need for actual evidence of how customers are likely to respond. To develop a revenue model questions that need to be asked are: Who will buy? What will they buy? Why will they buy? How soon, how often, and how many will they buy? With what effort and cost on your part? At what price will they buy, and on what basis will they pay?

4. Avoiding rocks and hard places - the topic for the chapter is gross margin models; the spread between the price at which products and services are sold and the cost of selling those (COGS). The key messages with the chapter are that digital technology enables gross margin models in which COGS approaches zero, that a superior gross margin model creates leverage that can be applied differently depending on strategy, and finally the fact that pricing decisions should be value-based and not cost-based.

5. Trimming the fat - is a short chapter on operating costs; all the day-to-day costs that must be incurred in addition to COGS. Key ideas are that by doing things differently in relation to other actors in the industry, operating cost can be lowered or eliminated, and by starting the analysis at the most costly or scarcest resources in the industry areas for business model innovation might occur. Another key point is that adding costs might also enhance the customers' experiences and willingness to pay premium prices, so cost cutting is not always the answer to profitability.

6. Cash is king - is according to me one of the more important chapters in the book as the balance sheet, working capital and cash management is often forgotten in business model discussions. Different industries and business models requires different amount of working capital (the cash a company needs to keep the business running) and all elements in the business model have implications for the cash generated and the cash consumed. From page 139: "Failure to earn a profit won't put you out of business, as long as you still have cash. But if you run out of cash, even if you are profitable, you'll be gone in a heartbeat"

7. It takes money to make money - focus on the investment needed to get the business started and through the period until it can generate enough cash itself, and the general goal (there are exceptions) is to find a way to get to breakeven with as little investment as possible. The authors mention some of the many trade-offs involved with external funding from different sources, but primarily focus on venture capital. The conclusions are: Less investment means giving away less of the business, less credibility lost when leaving a business model for another, and fewer sleepless nights if you've mortgaged your house.

8. Can you balance a one-legged stool? - tries to summarize, at least on a conceptual level, the different elements of the authors' definition of a business model, and their implications on one another. The conclusion is that the revenue model, gross margin model and operating model directly affect the working capital model, and these four models directly affect the investment model.

9. Getting started on discovering your Plan B - ends the book where it started with a focus on the talented and visionary entrepreneur. In the beginning of the book there were statements such as "Intuitively, as is almost always the case for committed, passionate, entrepreneurs, they felt that the answers to all five questions were yes" (p29) and in the end "dreaming your entrepreneurial dream" (p214)...

A quick comparison with some other popular books on business models:

Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengersby Osterwalder and Pigneur, atempts to introduce a standard language and format for analyzing and innovating business models based on the business model canvas. Getting to Plan B define the business model concept in financial terms and is not overlapping with this book. See my review here

Seizing the White Space: Business Model Innovation for Growth and Renewalby Mark W. Johnson, explores the circumstances when a new business model might be needed from an incumbent perspective, with several classic examples. See my review here

Open Business Models: How to Thrive in the New Innovation Landscape by Henry Chesbrough has a heavier focus on technological innovation in the context of business models and also covers the important area of Intellectual Property in relation to open business models.

The Ultimate Competitive Advantage: Secrets of Continually Developing a More Profitable Business Model by Mitchel, Coles, Golisano and Knutson, has a heavier focus on marketing with some ideas and questions relating to one-sided business models, so if you are looking to "sell more" perhaps you like this book. See my review here

The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits by Slywotzky, Morrison and Andelman, has a heavier focus on profitability and the changing areas in which high profit is possible to keep, it is a quick read. See my review here

All in all, the book is somewhat repetitive and rather long for the ideas it delivers, but with many interesting examples and important chapters on gross margins, operating costs and cash flow, it is well worth reading and a good complement to other books on business models not going into the financial details.

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Essential Elements of an Effective Business Plan

 

Jodie Shaw

Jodie Shaw

B2B Marketing Maven

276 Followers

I’m surprised by the number of entrepreneurs I meet who don’t have a business plan, or who have one that’s terribly outdated. Some people think a business plan is only necessary if you’re seeking investors or a loan. In fact, a business plan is much more than a financing device. It’s a tool for organizing your business, for monitoring is progress, and for holding yourself accountable for its success.

Whether you’re preparing to launch a new venture or have owned your company for years, there’s never a wrong time to craft a business plan. There’s also no wrong time to review and update an existing business plan; it should be a living document that evolves to reflect the changes and growth of your company.

A business plan serves as a roadmap for the next three to five years of your company and should include these seven essential elements:

1. Executive Summary

Begin the document with a synopsis of the entire plan. Although it’s the always the first element of a business plan, the executive summary is written last. The one-page executive summary should include your mission statement, basics about when your company was founded and by whom, a description of your products or services, highlights of your growth so far, and a summary of how you want the business to grow.

2. Company Description

This is where you elaborate on what you do (and the product or service you offer), who you serve, and why you’re different (and better) than the competitors. Think of this section as an extended elevator pitch that will help readers understand the what and why of your business. Describe what your business does, how that satisfies a need in the marketplace, the specific types of customers you serve, and any competitive advantages that have made or will make you successful.

3. Market Analysis

Now it’s time do a deep dive into your industry. This is where you identify and provide details about your target market (size, historical and forecasted growth rates, demographics, needs, purchasing trends, etc.), and determine what share of that market you can capture.

4. Competitive Analysis

Here you’ll assess the competitive landscape in your target market. What are their strengths and weaknesses? What are they trying to achieve? How do they market their businesses? What are the barriers you must overcome to compete and what opportunities you can take advantage of? Use this area to formulate a strategy to stand out from the crowd.

5. Management & Operations

Lay out how your company operates. Include your organizational structure, ownership information, profiles of your management team, and number of employees. Even in very small businesses and sole proprietorships, you should include a detailed description of who does what in your business and provide background information for key players.

6. Marketing and Sales

Explain how you’ll find and create customers by defining your marketing and sales strategies. For marketing, discuss your communications strategy as well as how and where you’ll share your messaging. For sales, focus on who will handle sales (and how you’ll train any outside help) and what tactics you’ll use to identify, attract, and convert leads.

7. Financial Summary

Finish your business plan with information about your company’s financial health and future. You can include expected gross income or other financial predictions, but keep them grounded in reality. This is a good place to include income statements, cash flow reports, and balance sheets to outline your assets and liabilities. If you’re seeking funding, this section is critical and must be as current, accurate, and detailed as possible.

A business plan is an important planning tool, and provides a solid foundation for building a successful company. If you’ve been putting off writing one or if you haven’t updated yours in forever, carve out a few hours this month to dedicate to your plan. I promise you’ll finish the exercise with more clarity and confidence about the future of your business.

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How to write business plan

Designing a Business Plan for Your Creative Business

Amanda Genther

https://bit.ly/2r0IyD8

Most creatives probably tremble at the thought of creating a business plan, and most likely keep pushing it to the back burner until eventually they need one and throw something together that isn’t complete. I’m going to show you an easier way to go about creating your business plan, with basic steps that shouldn’t be too daunting, if you take them one at a time.

So, what is a business plan?

A business plan is meant to guide your business in the right direction and document your thoughts and ideas for your business. It’s a structural tool that can keep you, your employees and your business on the correct path. The first purpose of a business plan is to identify the aspirations of the business. Second, it’s needed to determine if these aspirations are feasible in the current economy. Third, your business plan is needed to outline the steps you will take to reach your main objective. When I create my business plans, I like to lay it all out there first, and then start to remove pieces that are irrelevant. Think of your business plan as writing a book; you’ve determined the ending, but now you need to fill in how you will reach that desired ending. You will want to be able to hand this business plan over to investors, peers, banks, attorneys, etc, so it’s important to keep a defined look. But, since we are creatives, don’t be afraid to play with the layout and colors, just don’t get too crazy! Keep it readable, clean and professional.

The basic elements of a business plan

1. Executive Summary – this is a one-page nutshell of your business. It includes the background behind your business, your mission, your vision and your tagline/message (if you have one). Keep it short and to the point. The rest of the business plan will go into much more detail.

2. Target Customers/Ideal Clients – this is where you will explain who your business is targeting, who your ideal clients are; their personalities, what they like to do, how old they are, their income level, how much they are willing to spend on your products and/or services. A survey is definitely a good idea to help gather information on your ideal client.

3. Competition/Competitive Advantage – this is where you will detail who your competitors are, what their strengths and weaknesses are, their business structure, and your competitive advantage, or what makes your idea better/different than theirs.

4. Human Resources – if needed, this is where you will document what staff you will need to run your business, what their skills need to be, how much experience, how much you can afford to pay them, etc. I did not need this section on my business plan, because I do not plan on having any staff in the near future. When the time comes, I will definitely add this section to my business plan. It would be wise to add an intern description here, if you plan on having an intern soon. This would layout the groundwork for what they would be responsible for.

5. Vendors/Supplies – this is where you will determine what outside sources will be needed to run your business. Are there any products that you must purchase on a weekly basis (jewelry supplies, paper) or do you use certain products for your clients (USB drives, cards, shipping, boxes/packaging materials)? Put all of these items here, their costs, what category they fall under (supplies, client gifts, packing/shipping, etc). You will need these for you financial plan later, but this section will detail each of the costs.

6. Marketing Plan – this is where you will show how to get your products and/or services in front of your ideal clients. What social media profiles are they on, are they bloggers, do they read certain blog, do they attend conferences? All of these things will help you figure out where, when and how to find your perfect customer. Your marketing plan is actually an entirely different document outside of your business plan, but laying out the general ideas here is great.

7. Operations – this is where you document how to get the job done in the most efficient way. What are your routines for your projects? What order do you follow from the first time you talk to the client/customer to when the client/customer has the final product delivered to them? Describe your operations as if you were teaching 5,000 people how to work at your company. Document everything.

8. Financial Projections – this is where you determine how much money you need to open/run your business and where you will get this money from. Most creative businesses are able to start their companies on smaller budgets, because they tend to not need real estate, and already own the large equipment needed to get the business going. Put your financial forecast on here; how many products do you want to sell, how much do each of your products cost, what is the yearly total? How much did you spend on supplies? What is your profit for the year? You want to be able to show an investor why and how your business is going to make money, so be realistic.

A visual representation

Now what?

I recommend taking the business plan one item at a time. Schedule a time every Sunday where you tackle a part of the business plan. Or, if you are feeling really ambitious one night, tackle a couple of them. Either way, don’t stress yourself out. If you aren’t in a business planning mood that day, then don’t do it. Plan time when you can concentrate and your brain is able to think long-term.

Some tips:

– Write the business plan in your own voice. No need to be stuffy, you are a creative and the person you are presenting this business to will already know that. Creatives are great at creating their own unique voices and styles, so make sure you show that here.

– Keep your business plan versatile. It is very likely that it will change as your business grows, so be sure to document these changes.

– Stick to it! You should know your business plan inside and out, almost like a very long elevator pitch. When you make decisions for your business, you should take your business plan into account.

Writing a Business Plan for Your Small Business

Knowing EXACTLY how your business will operate can help you get funds and avoid problems.

by Kathy Batesel

When Does an Entrepreneur Need a Business Plan?

When starting a new business, would-be entrepreneurs are instructed to draft a business plan. Many of them shrug off the task because they believe they have a sufficient plan already in mind or because they feel overwhelmed at doing the necessary research and writing to create one. They may not know exactly what a business plan is, or what it can do for them.

And it's BORING! It's much for fun to think about the possibilities and the success and how great things will be. Writing a business plan takes the fun and excitement and replaces it with reality, which is never as fun as our wildest fantasies, is it? Sadly, though, a good business is essential to making the very most of your business.

In my public relations studies, I learned how important they are and how to create them. I used my education to craft my own business plan when I became a Realtor. After I moved to another state, my new broker discovered that I could write business plans and hired me to help her draft commercial plans that enabled small business owners obtain financing to buy commercial real estate and fund their new business operations.

Because the vast majority of businesses fail during the first year, and a high percentage don't become profitable for several years, entrepreneurs should avoid sinking large sums of money into their new business without having a good idea of just how much profit or risk they're facing. Writing a business plan will help them see potential pitfalls and plan for them before they've signed an expensive commercial lease, purchased costly equipment, or devoted hours of time to no avail.

On the other hand, if you're planning to create a shoestring business that's not aimed at creating income, but simply something you want to do for pleasure (and that doesn't cost you an arm and a leg to keep going) you may be able to skip planning.

There's an old adage that says that in order to reach success, you should "plan your work, and then work your plan." Makes sense, doesn't it?

Benefits of a Good Business Plan

When you draft a business plan, you can slap it together with little thought or you can pay meticulous attention to research, detail, and tactics. The benefits you'll see from using it are only as good as the plan itself.

With an excellent business plan, you can:

• Use that fabled OPM - other people's money. Business loans, capital investments, and grant moneys won't come your way if you have a crappy business plan.
• Predict problems before they happen.
• Craft better strategies for gaining the biggest share of the market for which you're competing.
• Avoid unpleasant surprises about costs you'll face as your business develops.

Your mission is the foundation of your business. A good mission statement is simple. It should be no more than a couple of sentences. Your business should never take action that isn't compatible with its mission.

Source: Pompeychuck via Flickr. CC-BY 2.0

Before You Begin Writing

A top-notch business plan - the kind that attracts investors - is one that proves you know everything you need to know about what you're doing. If you provide your business plan to an investor or lender, they are likely to turn you down if your planning hasn't addressed every single important factor they can imagine.

That means you need to research thoroughly. Although free online software and paid professionals can provide the structure and words for your document, it's still up to you to be the expert. I recommend using a free template to prompt you to think of individual items you may have overlooked, but many of the giveaway products available online are woefully incomplete. You'll have to add detailed information about each element that can affect your business:

• Your mission statement - a one or two sentence description of how your business will meet consumers' needs. Your mission statement should be simple, easy to understand, and general enough to allow for growth but specific enough to tell readers what the long-term purpose of your business is. Your purpose will be the same in twenty years as it is today, so think carefully about what needs you'll meet as times continue to change.
• A SWOT analysis - the strengths, weaknesses, opportunities, and threats your business will face. This step may involve some research, something I discuss in Research Your Business Plan.
• Projections - You'll need to have an idea of how much income your new business can generate. This step may seem overwhelming, especially if you haven't yet been operational. It may involve some guesswork, so it's especially important to be cautious here. Research on things like traffic counts for the area where you'll operating, online sales data for similar businesses, seasonal fluctuations, and factors that can boost or harm your sales can help you hone in on realistic figures.
• A cost analysis - realistic, accurate descriptions of every dime you will have to spend for your plan to be enacted. That means costs of equipment, details of payment plans you can take advantage of, labor costs you expect to pay, one-time and ongoing operating expenses, and overhead like property lease or purchase, electricity costs, or advertising. If you're counting on your cousing Joe to work on the cheap, that's great, but pretend he's a regular employee when it comes to your planning just to be on the safe side. Similarly, if you plan to use borrowed equipment or business space to save money, don't mention this in your plan. Instead, draft your plan as if you're paying for everything to avoid complications when unexpected difficulties arise. There are many free templates available from Microsoft to help you create many types of cost analyses.

Brief Sample of an Expense Cost Analysis

Expenses	Jan.	Feb.	Mar.	Total Q1	April	May	June	Q2
Rent	$1,500	$1,500	$1,500	$4,500	$1,500	$1,500	$1,500	$4,500
Labor	$2,200	$2,200	$2,600	$7,200	$2,200	$2,200	$2,200	$6,600
Electricity	$250	$250	$200	$700	$200	$200	$275	$675

Your business plan will highlight key personnel, partners, and who will be served by your company.

• Marketing plan (your target audience) - although your business plan's marketing section won't be as detailed as a strategic marketing plan, it will form the basis of your early efforts to generate customers. You'll need to focus on who you'll be targeting to do business with you, demonstrate that your target is likely to want to do business with you and why, describe how you will reach that audience, and how much it will cost to reach them. The "general public" is never a target audience! Consider which age groups will want your service or product, where you can find them, why they want what you're providing, and whether there's a specific arena where they'll congregate and be receptive to what you have to offer. (You'll find a few tips in the video below.)
• Market Plan (strategies and tactics) - You'll briefly describe channels that you'll use for communicating with them, whether that will be television advertising, radio blurbs, e-mail campaigns, direct mail, or other methods. Whichever methods you choose, you'll want to educate your business plan's readers on why that method is the most effective way to get your message to the target audience you've selected. Ideally, you'll find an arena and channel that makes it virtually impossible for your target audience to ignore what you're offering.
• Expertise - Your business plan should include information about the people who will be executing the plan, starting with you. Other key players who provide skills outside of your expertise should also be included, such as business partners, financial officers, or legal staff who are instrumental in making your plan work as you want it to. Each person should have a brief biography that shows that they are an ideal candidate for the tasks they'll be responsible for. Each bio should be brief, perhaps a paragraph, and include enough information to prove their abilities, but not more than is necessary.
• Executive summary - although it will appear at the front of your business plan, this is the final step to complete before putting all the information together into one document. Your executive summary shouldn't be more than two pages. It will tell people the basic information they'll find when they read the rest of your plan.

Assembling Your Business Plan

In the video above, you saw some general principles that are helpful to observe when preparing to write your business plan:

• Your plan should be 20-25 pages.
• The financial information will be critically important to investors you may approach.
• You will find yourself revising often as you hone in on certain segments and discover that something you hadn't considered before affects an aspect you already thought was prepared.
• It's important to have objective, concrete data rather than optimistic hopes.

Once you have completed each section of your business plan and made any necessary revisions, you'll be ready to assemble it in order. You may want to include some graphics, such as charts, tables, and calendars that help your business plan readers to envision your plan as thoroughly as you do. Small photos of people can accompany their biographic information, and you may have a logo you want to use. Avoid using too many pictures that distract readers, and stick to basic colors: white paper, black font, and minimal added colors.

You can use three-ring binders to assemble the pages and give you maximum flexibility if you find that you need to make revisions as you go. (I don't recommend hiring expensive printing to make a fancy book until you're certain that no more revisions will be needed!)

When you're done, a potential investor should be able to open your binder and see the following sections in this order:

1. Table of Contents with page numbers
2. Executive Summary
3. Mission Statement
4. SWOT Analysis
5. Income Projections
6. Costs Analysis
7. Marketing Plan
8. Bios
9. Appendix (sources of information you've cited and additional relevant information)

10 keys to a successful business plan

Skip the Boring Business Plan. Focus on This Strategy Instead

FEBRUARY 06, 2015

The concept of starting a business without a plan would send anyone running -- and for good reason. Every great business begins with a plan that outlines measurable goals and the methods for achieving them. Plans, done correctly, can be a great roadmap.

The real question is how detailed does your plan have to be.

Business plans serve a very specific purpose: to demonstrate where you currently are and where you would like to be. In simple terms, how you will get from point A to point B. The problem is that as with any startup, you have very little information as to the best way to reach Point B. Startups don’t even know who their customers are or what their product should be.

“Planning and forecasting are only accurate when based on a long, stable operating history and a relatively static environment,” said Eric Ries in the introduction for The Lean Startup. “Startups have neither.”

As a serial entrepreneur, I’ve come to appreciate the unpredictability of running a startup. It’s a fascinating ride to watch different iterations of your product strike new chords with an expanding audience, and I’ve come away from these experiences with a few insights into what should go into the planning phase of starting a business.

Business plans are becoming increasingly irrelevant.

Customers have never cared about your business plans, and nowadays, investors are increasingly becoming less fond of them.

Take Y Combinator, for example. Y Combinator is a Silicon Valley-based accelerator that has helped fund over 500 companies in its nine-year history. Their portfolio includes giants like Airbnb, Reddit and Dropbox. Getting into the Y Combinator is a competitive process, but one thing you absolutely don’t need to get in is a business plan. They don’t ever read them.

Sam Altman, the president at Y Combinator, explained this logic in an interview with Russell Roberts on the EconTalk podcast.

“At the stage that we are operating at, (a business plan) is irrelevant,” Altman said. “We would rather them spend the time working on their product, talking to users. What we care about is: Have you built a product? Have you spoken to users? Can we see that?”

Map out your business model with a 'Lean Canvas.'

Written business plans take a lot of time to create and don’t allow the flexibility you need as your business grows. However, it’s still important to map out your business model and document your hypotheses, which you can do effectively with a "Lean Canvas."

Created by Ash Maurya and adabted by Alexander Osterwalder, a lean canvas is an actionable and entrepreneur-focused business plan. It focuses on problems, solutions, key metrics and competitive advantages. With hundreds of different things you could be doing, a Lean Canvas helps you hone in on the one or two things that should take top priority.

Here is a sample of a Lean Canvas:

This model captures the same level of information as a traditional business plan, but in a single page. It also gives you much more flexibility to switch to a plan B if plan A doesn’t work out, allowing you to transition to a new approach without running out of resources.

Being able to boil down the essentials of your business model onto a single page can pay huge dividends. When you meet with customers or potential investors, you won’t have much time to describe your entire vision. If you can describe your customer's problems clearly and succinctly, you can get to the heart of why your solution fits.

So how do you start?

Start by setting a timer for 15 minutes and filling out the sample Lean Canvas with as much information as you can. This will help you identify what you know and don’t know about your business. Don’t be afraid to be brutally honest with yourself, and you can even leave certain areas blank.

After you complete the canvas, you can quickly identify the riskiest parts of your business. At this point, you can begin to build experiments to gather data about those areas to test your assumptions. These experiments will test the waters of some of the most fundamental aspects of your plan. For example, let’s say you identified social media as the optimal channel for reaching and converting your customers. After a few weeks of test runs, however, you may learn that your audience is not as socially active as you originally projected. Considering this was your main plan-of-action for reaching your customer base, you’ll have to reassess your understanding of who your market is and where they can be reached.

 

After about a month of experimenting, you will hopefully have learned enough to be able to return to your Lean Canvas and update it based on your new findings. And, if you’re like most startups, you won’t get it right the first, second, or probably even third time. Reevaluating the main components of a given business model is not uncommon in the early years of many major corporations.

 

As a startup, you are in a race to deliver customer value. Sinking time into writing out a business plan -- a plan that you probably won’t be able to stick to -- can be a tremendous waste of time. You can get all of the benefits of a business plan on one page, and this will help you discover the two or three things that matter most today.

by 

CACHE MERRILL

CONTRIBUTOR

Founder and CTO of Zibtek