Thursday, October 2, 2014

Business Plan Innovations (10 Best Practices)

Business planning is changing in tandem with the massive shifts in the
economy, in innovation, and even in politics. Conventional business
planning previously relied on industry structure and provided best case
scenarios in economic forecasts and financial analysis. But when
whole industries are getting disrupted, and tech advances are coming faster
than we can embrace them, the optimal business plan needs to reflect the
speed of innovation and the flexibility to prepare for change by envisioning
alternative scenarios.
Here are ten suggestions about how to keep your business plan flexible,
dynamic, and effective.
1. Review the competition
Business plans that don’t include the competition are naive. You may
think there’s nothing on the market that competes with your idea, but that
shows a lack of research or imagination. Even if you have a great idea for
a new product that didn’t exist before (think iPhone), you need to anticipate
that success will spawn competition (think Android). Your business plan
should not only look at current competitors, but who might be drawn into
the market by your success. Information on the competition should explain
each company’s place in the market and unique selling proposition. Ideally,
the business plan describes not just the working of your business, but how
it fits into the constellation of competing firms in the field.
2. Highlight innovation
It is not enough to show that you have a product or service that’s in
demand. Investors want to see that you have a plan for staying in demand
through innovation.
  • Detail your process for upgrading your products or services
  • Include a schedule for product revisions or upgrades
  • Outline investments in research and development
  • Mention any connections with research institutes or facilities
3. Prepare for success
Success can kill a business just as quickly as failure. Rapid growth
requires capital that must be advanced to generate the cash flows
needed to repay lenders and investors. Many business owners outrun
themselves, putting their businesses at risk from even slight shifts in the
direction of the market. If you are anticipating rapid growth, your business
plan should attempt to outline how you plan to cope with it.
Your plan should include:
  • Pro Forma Cash Flow Statements, illustrating the needs for cash as
the operation grows, and how those needs will be financed.
  • Facilities Inventory, showing how much space the operation currently
needs, how much more space will be needed to accommodate
anticipated growth, and when existing facilities will have to be
upgraded to remain sufficient.
  • Scenario Planning, showing how your business will handle a “worst
case scenario” of events not going your way.

4. Show how you will get buy-in
This might sounds obvious, but the whole company and all of your
employees should be committed to following the points included in your
business plan. How can you get everyone on the same page? How can
you prove it?
  • Share the Business Plan. Make the business plan widely available to
employees as a printed document, an electronic document, and on the
company intranet. If part of the plan must be kept confidential, share
the portions that you can, such as the company mission statement,
goals, and vision.
Include the Plan in Orientation. New hires should be introduced to
the company’s business plan during the new hire process.
  • Require Employees to Sign the Plan. If not all employees,
certainly the leadership team should be willing to sign off that they
have read the company’s business plan and are committed to
putting it into effect.
  • Track Compliance with the Plan. The business plan should
include information on how you intend to measure actual progress
against the plan. Will this be done quarterly, annually, or at another
prescribed interval?
5. Retaining top employees
Keeping your employees engaged and rewarded is essential to
employee retention and achieving business plan goals. Your plan
should outline systems or methods you will use to identify and retain top
performers, such as:
  • performance review process
  • employee training and development programs
  • employee recognition program
  • compensation policies, including profit sharing
  • advancement program
6. Exploring an exit strategy
A corporation has an unlimited lifespan, but the owners or managers
don’t. Just as many people put off estate planning because they don’t
want to face mortality, so business plans often fail to address the end
game for the entity. Are you grooming the business for sale? What
steps will you take to get it ready for market? Do you have a succession
plan? Who is going to run the business when the current management
is no longer able or willing to continue. Business plans should contain
guidance on how the company plans to sell itself, go public, or reach
other desired outcomes.
7. Include buyer personas
It’s not enough for your business plan to talk about your customers without
including detailed information about who, exactly, they are. Business plans
traditionally include buyer demographics, such as age, gender, income,
education, and other basics. The trend in business plans is to include
detailed buyer personas that provide a 360-degree look at who your
customers are. Beyond basic demographic information, buyer personas
often include the lifestyle, habits, interests, and aspirations of your ideal
customers or existing customers.
8. Include online media and content creation in the marketing strategy
More and more, businesses rely on the Internet and social networks to
attract prospects and distribute information about products and services.
More often, buyers are turning to the Internet and social networks for
business reviews, ratings and recommendations. The marketing portion
of your business plan should include information about how the company
intends to use Internet marketing, including:
  • Social Networks. What is your strategy for marketing on Facebook,
Twitter, Google+, and LinkedIn? How do you plan to attract followers
and maintain these accounts?
  • Multimedia Networks. It’s often more effective to market with
multimedia than text. How will your marketing operation use Pinterest,
YouTube, SlideShare, podcasting and webcasting to bring your
message to the target audience?
  • Content Marketing. Businesses need an array of quality content to
attract prospects and boost search engine position. Your business plan
should address how you plan to use direct email, newsletters, blogging,
infographics and other content packages to your advantage online.
  • Search Marketing. Your business plan should include a strategy for
achieving and maintaining high search engine rankings for target
keywords and phrases. It could take the form of a pay-per-click
advertising program, a guest blogging program, or some other content
marketing initiative.
9. Incorporate economic forecasting into your business plan
Customer needs evolve, new technology and competition emerge, and
markets change. Making “economic assumptions” when you develop
your business plan helps deal with those changes. Bill Conerly, Forbes
contributing writer and consultant, suggests that businesses incorporate
economic forecasts into their business plans. He offers these guidelines
along with some numbers:
  • Don’t bet your company on one economic forecast. Use multiple
forecasts for a rounded view.
  • Expect moderate economic growth. In 2013, the overall economy is
expected to grow by 2.6 percent inflation adjusted, according to the
Survey of Professional Forecasters (a free resource from the Federal
Reserve Bank of Philadelphia, and a good source for business forecasts).
  • Inflation will likely remain mild. The Survey of Professional Forecasters
puts the Consumer Price Index increase at 2.1 percent in the coming
year. With the unemployment rate expected to be 7.1 percent in 2014,
it’s unlikely wages will rise much. In 2012-2013, wage and benefits costs
combined grew by only 1.9 percent
  • Expect interest rates to rise. The increase in short-term interest rates
won’t begin until 2015, but long-term rates will rise slowly, according to
the consensus reported in both the Journal’s survey and the Survey of
Professional Forecasters.

10. Experts agree: Business plans need to see the downside
Why do some business strategies work and other fail? If yours fail, says
strategy consultant Steve Tobak, don’t feel bad, as few business owners
are business experts. Business owners start their businesses, Tobak
notes, because they’re passionate about their product or services, and
because they see opportunity, but don’t necessarily know how to sustain
growth. To achieve sustainable growth, Tobak says, business owners
should reevaluate their existing business plans often and include an
economic contingency. Meaning: Know when to walk away.
Conerly also advises incorporating economic contingency into your
business plan. “The Wall Street Journal’s economic forecast panel
estimates a 15 percent risk of recession in the coming 12 months,” he
writes. “That deserves some thought.”
Alejandro Crawford, senior consultant at Acceleration Group, also gives
great advice in his U.S. News & World Report article:
Dispense with the conventional business plan with its long range
predictions, its reliance on static assumptions about the market, and its
tendency to rationalize and defend a model and strategy built around
those assumptions. Instead, systematically embrace the potential shifts
that would challenge that model and that strategy. Focus on what it
would mean if these shifts occurred. And build a dynamic strategy by
developing a bold vision for what could happen, testing the market to see
what is happening, and positioning yourself to make the most of changes
as they occur.”
Source: - October 2, 2014


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