- 16th April 2018
- Posted by: Manolis
Planning is important. But results are what count. And who delivers the results? Entrepreneurs. Entrepreneurs like you can change the world. Why, then, is there so much fascination with business plans in today’s entrepreneurship community? Why are there dozens of books titled something like ‘How to Write a Business Plan’? Why are there numerous software packages to automate the business planning process? Why do most leading business schools offer courses in which teams of students write business plans for proposed new ventures?
Let’s Face the Facts
Unfortunately, it is clear that the vast majority of business plans raise no money. Of those ventures that are financed, many if not most will fail. The simple fact is that most business plans should never have been written, and most with any merit are written far too soon, before there’s any real evidence to support their assertions. So, why are so much blood, sweat and tears invested in labouring over the perfect business plan? Good question.
“Is there a solution,” you might ask. Indeed, there is. Instead of diving into business planning mode, step back and ask yourself whether the opportunity you have in mind is genuinely attractive.
That’s what an aspiring entrepreneur named Cassian Drew did before embarking on a plan to sell climbing wall hardware and exercise programmes to fitness facilities. He spent a summer examining his opportunity and, in the process, learned exactly how fitness operators assess the economics of the gear they acquire. Alas, it quickly became clear that the economics underlying what he had thought to be a great idea just weren’t going to fly. While he and his partner were well suited to the opportunity and the market was attractive – with booming interest in both fitness and climbing in the UK – there simply wasn’t a business model that would work.
As Cassian Drew and countless numbers of entrepreneurs have learned, usually the hard way, opportunities are best understood in terms of three crucial elements: markets, industries, and the one or more key people that make up the entrepreneurial team. The seven domains model articulated in The New Business Road Test: What Entrepreneurs and Executives Should Do Before Writing a Business Plan brings these elements together to offer a clearer way to answer the crucial question that every aspiring entrepreneur must ask him- or herself every single morning: “Why will or won’t my idea work?”
The model offers a better toolkit for assessing and shaping market opportunities and a better way for entrepreneurs or entrepreneurial teams to assess the adequacy of what they themselves bring to the table as individuals and as a group. The model also provides the basis for what I call a customer-driven feasibility study that entrepreneurs, whether in nascent start-ups or deep in the bowels of an established company, might use to guide their assessments – before they invest precious time and effort in writing a business plan (see the Exhibit).
Why Bother with a Road Test of Your Idea?
Why shouldn’t you, as a would-be entrepreneur, simply skip the road test and proceed directly to preparing a business plan?
First, getting a clear and evidence-based view of your opportunity – without the rose-coloured glasses – give you a chance to opt out early in the process, before investing your precious time and energy in preparing a complete business plan. Thus, it can save weeks or months of time that might be wasted on a fundamentally flawed opportunity.
Second, for opportunities that do look promising, the road test jump-starts the business planning process and provides a clear, customer-focused vision about why your proposed venture makes sense – from market, industry, and team perspectives, viewed independently and collectively. It identifies the customer pain, how you’ll resolve it, and the one or two domains that make the opportunity stand out. These factors become the drivers of your business plan.
Third, by ensuring that all aspects of the opportunity are examined, your analysis reduces your risk of entering a fatally flawed venture. And we know from experience that, for most entrepreneurs, the most likely outcome is not the one they had envisioned!
Avoid Impending Disaster
No car-buyer would buy a new car without a road test, and that’s a far less risky decision than the one you are about to make. Entrepreneurs who proceed without putting their opportunity through a new business road test ignore it at their peril!