How To Formulate (and Reformulate) Your Business Plan

Formulate (and Reformulate) Your Business Plan

Donald N. Sull, associate professor of management practice at the London Business School, in an article in the MIT Sloan Management Review, offers some practical suggestions on managing inevitable risks while pursuing opportunities. Here is a capsulation of his suggestions on how to formulate (and reformulate) your business plan:

• Be flexible early in the process and keep it fluid. Don't commit too early. Expect your first plan to be provisional and subject to revision.
• Ask yourself if your experience or expertise gives you the right to an opinion on your specific opportunity.
• Identify your potential deal killers: variables that are likely to prove fatal to the venture.
• Clearly identify what you see as the key drivers of success. What are you betting on here?
• Raise money only in sufficient amount to finance the experiment or evaluation you next envision, with a cushion for contingencies.
• Delay hiring key managers until initial rounds of experimentation have produced a stable business model.
• At some point, take the plunge and test your product or service on a small scare in the real world through customer research, test marketing, or prototypes.
• Test and refine your business model before expanding your operations.

Top Ten Do's and Don'ts

THE TOP TEN DO'S Prepare a complete business plan for any business you are considering. Use the business plan templates furnished in each session. Complete sections of your business plan as you proceed through the course. Research (use search engines) to find business plans that are available on the Internet. Package your business plan in an attractive kit as a selling tool. Submit your business plan to experts in your intended business for their advice. Spell out your strategies on how you intend to handle adversities. Spell out the strengths and weaknesses of your management team. Include a monthly one-year cash flow projection. Freely and frequently modify your business plans to account for changing conditions. Custom Business Cards

THE TOP TEN DON'TS Be optimistic (on the high side) in estimating future sales. Be optimistic (on the low side) in estimating future costs. Disregard or discount weaknesses in your plan. Spell them out. Stress long-term projections. Better to focus on projections for your first year. Depend entirely on the uniqueness of your business or the success of an invention. Project yourself as someone you're not. Be brutally realistic. Be everything to everybody. Highly focused specialists usually do best. Proceed without adequate financial and accounting know-how. Base your business plan on a wonderful concept. Test it first. Pursue a business not substantiated by your business plan analysis.