Business plans - the bedrock of effective strategy execution

Successful ideas are good ideas wrapped in a compelling narrative that mobilises and aligns relevant stakeholders

There are (many) fewer successful ideas in the world today than there are good ideas. A distinguishing feature of a successful idea is that proponents have been able to enroll the services of many others to collectively bring the good idea to life. Empirical research clearly demonstrates that this is achieved most effectively by wrapping good ideas in a compelling narrative that mobilises and enables other employees, investors, and customers to aligned action.???

Business plans provide the foundation block to creating a compelling narrative

One of the great privileges we have at Guberno?Consulting is collaborating with courageous people?with?good?ideas who are working very hard to?turn?them?into?successful?ones, i.e.?businesses that have a compelling narrative and aligns relevant stakeholders.?We partner with business?leaders to?think through good ideas in a structured and strategic way to achieve successful and?executable business plans.?A?clear?and concise business?plan?provides the foundation for?making inevitable?trade-offs?in an environment of constrained resources.?Business?plans also form the foundation for?compelling pitch decks and elevator speeches?that?passionate leaders use to mobilize existing and potential stakeholders to raise money, secure value adding partners, attract the best talent, and to win over?strategic customers.?

?The 10 key questions that need to be addressed in a business plan

There are 10 key questions that need to be addressed in a business plan which are explored in detail herein and incorporates the ‘what’, the ‘how’, and the ‘who by when’ of business decision-making.?Failing to address these key questions weakens the strategic spine that holds a great?business?narrative together; one that attracts and retains the best people to bring the idea to reality.

What is the business idea?

·??????What is the product or service being delivered to whom – while an obvious starting point, it is not always delivered, or delivered in a way that is concise, clear, and understandable. Ideally, describing it in less than a few sentences is preferable and even better if it can be encapsulated in a ‘tagline’ such that relevant actors naturally ‘get it’. There is power in simplicity.

·??????What is the unique value proposition – this comes from intimately understanding the job that a product or service will be acquired to perform and its relative distinctiveness or differentiation in performing the job relative to the status quo. The foundation of disruptive value propositions occurs where proprietary capability (e.g. technology) can be exploited to increase accessibility and consumption by existing non-consumers of the incumbent’s products and services.

·??????What is the market opportunity – this is describing the scale and growth trajectory of the market opportunity and by inference the future potential for the business. Despite a temptation to target a small market shares of big target markets, it is not necessarily a good thing. Targeting a larger share of a well targeted but smaller addressable market (which can be naturally extended if successful) can signal more thoughtful market segmentation and understanding of relative competitive advantage of the business’s products and services.??

·??????What is the competitive environment – this is important in understanding the relative strengths and weaknesses of the alternatives to the business’s products and services. There are always competitors – even if the competition for a new product and service is the status quo. A thoughtful understanding of the competitive environment is a core signal of respecting consumers choices while also providing critical inputs to enabling the business to hone its unique value proposition.

How will the business idea be implemented?

·??????How will the business make money – this is describing the economic engine of the business. Often an iterative process between identifying target pricing relative to established and comparable market reference points and the relevant cost structure for delivering the product or service. In most cases, there is a temporal perspective to the economic model as the business model evolves and scales over time. Identifying and monitoring proof points for key assumptions underpinning the economic engine is important.???

·??????How will the business execute the strategy amongst alternatives – this is identifying preferred pathways relative to available alternatives in how the business breaks down its ambition into a sequence of logical steps. Importantly, having near term progressive milestones is critical in demonstrating how ambitions goals are delivered by a series of assignable actions. Equally, understanding phasing and sequencing of activity and their relationship to customer acquisition and capital commitments is key to defining business plan practicality.

·??????How will business market or sell your product or service to make money – this defines the means (methods and channels) the business will use to sell its product and services. Identifying target relationships with channel partners is central. Importantly, for those products or services that depend on a networking effect to scale and grow, defining the pathway to overcoming the ‘cold start’ challenge of initiating network momentum is key. Estimating sales cycles is an important building block.

·??????How much capital will the business need to succeed – ideally the business plan should identify the resourcing needs, and in particular capital, for a 12 to 18 month period to deliver identifiable milestones. Importantly, the optionality between capital invested and the speed of milestone delivery is key. Invariably there is a healthy tension between the level of capital availability and the cost of capital at today’s versus tomorrow’s valuation.

Who is the team and when will targets be achieved?

·??????Who are the management team and why are they credible – this provides confidence and credibility of why the assembled management team are uniquely equipped to deliver the business plan aspiration. While it is common to sprout the world class nature of a management team, and every once-in-a-while it is true, it is rarely possible. While the team may be appropriate for early stages business growth they are often replaced as the business increases in scale and complexity.

·??????When will target financial milestones be reached and how does this affect business valuation – while every business plan invariably overshoots projections (and most audiences know this), outlining business financials is an important process in translating the business logic of words to a logic of numbers – with the most critical numbers being a handful of key financial assumptions. Understanding how financials translate to business valuation is key to guiding equity valuations for raising capital and/or in negotiating trading of the company in the event of M&A activity.

?Business plans are an essential bedrock of effective strategy execution.

A clear business plan is a critical bedrock of effective strategy as it forces articulation and alignment of the preferred actions amongst a range of alternatives. It helps to harness compelling and persuasive storytelling to engage with existing and potential stakeholders. When communicated by passionate and engaging leaders,?good ideas have a greater propensity to become successful ones.??

Andrew Rosengren, Managing Director Guberno Consulting

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