If you don’t know where you are going you will probably get there! This is a favorite and time-tested saying of our Senior Strategic Business Management partner, Dr. Larry Blaine. So why is this such a truism?
Today’s executives know that they have to constantly balance time, money and risk. But in our over-burdened work environments, we often get tangled up in day-to-day tactics, and lose sight of the importance of strategy and planning. Everyone shudders at the phrase, “business plan,” but its real value is in a carefully thought out approach to testing a business idea against the realities and dynamics of the marketplace and the capabilities of the company.
Let’s face it. The era when we could come up with a new product or service, rent a building, and go into business, has largely gone the way of the wagon. Success today requires taking a new idea and examining it under the glaring light of each aspect of the traditional business plan components to dramatically improve the likelihood of success. It also enables us to reduce the potential obstacles, and develop the necessary solutions for market and business challenges.
Next, a well-crafted business plan which roadmaps short and long-term financial, marketing, and operational goals results in a clear understanding of what steps need to be taken before we ever open the door to the new business.
The major franchisors today such as McDonald’s, Starbucks, etc., do their homework so well that they can actually predict sales volume before they open the door. Granted, these mega-companies have an enviable database against which to draw, and few of us can expect that kind of precision. But we need to know four critical things when it comes to a decision to go forward:
- That there are enough customers available within the target markets that will be willing to pay for our product or service.
- What the costs are for us to produce or provide our product or service, and if this enables a price structure that will be profitable to the company.
- What the cash flow is for our products and services, and whether or not we have sufficient budgets or financial cushion to enable the company to support the launch.
- What your competition is doing. Competition today can be international as well as local and regional, and you need to know exactly what they are doing, as it can make or break your business.
“I have an idea” is a wonderful starting point for a business. But the high failure rate of most businesses is a result of not knowing what they are doing, and running the idea through the necessary business plan filters.