Another MindMaps ZA Meal – Food for thought to fatten your insights: Article Review
Article: Business Planning
Tagline: Not to plan, to plan or to model?
Author: Rian Malan
Source: MindMaps ZA
Discover: An alternative approach to traditional business planning
Salient Content
The article looks at Steven Blake’s recommendation that new start ups should not spend months on doing a business plan but should rather formulate the business model and then test it before doing the plan.
Nourishment
This approach is quite empowering and we highly recommend that you investigate it in more depth.
Business Planning – Not to plan, to plan or to model?
In the first article in this series we looked at three key essentials for business plans, and the briefly addressed the issue if you really need a plan. In this article we will look at a third option, namely to test your business model before you start writing the plan
Steven Blake recently wrote an article titled “No Plan Survives First Contact With Customers – Business Plans versus Business Models.” In the article he relates the story of two teams of his ex-graduates that were faced with the same challenge – to start up a new business venture.
The one team spent almost four months drafting a “master” business plan. When they eventually went out they realized that at least half of their key assumptions in their plan were wrong. They were back to square one.
The other team spent two weeks “laying out their hypotheses about sales, marketing, pricing, solution, competitors, etc. and put in their first-pass financial assumptions.” They then went out to test their business model.
Steven’s whole argument is that no plan works initially when you put it in practise. It is therefore essential to first test if the “business model” works. What does he mean by a “business model”?
According to him a business model describes how your company creates, delivers and captures value, or a she states it, in plain English it describes how your company makes money. In another article by Steve he goes into a lot more detail about the concept of a business model and how it differs from a business plan.
In that article model he asks the following question and amswers it as follows:
“Wait a minute, isn’t the Business Model the same thing as my Business Plan? Sort of…but better. A business plan is useful place for you to collect your hypotheses about your business, sales, marketing, customers, market size, etc. (Your investors make you write one, but they never read it.) A Business Model is how all the pieces in your business plan interconnect.”
What Steven brought to the party may be very valuable to you. It may save a lot of time and “detouring”, and may ensure that you get to market a lot quicker. Testing your model does not mean that you don’t need a business plan. It means that when you do your plan your key assumptions may very well be close to the realities of the marketplace.
We recommend that you dig a bit deeper into this. Links to the articles are on our Business Planning Article Database (see link below).
In the next article we will look at a format (the content) of a business plan. There are hundreds if not thousands of these available on the Net. We will however give you our preferred outline after having sifted through many of those.
Happy planning. Make it a challenging, exciting and creative experience.
See more food for thought at our Business Planning Article Database
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