Monthly Archives: September 2015

Why Most Business Plans Fail

To make my point as clear as possible, I’ve decided to attack this question from a different angle. When my sister was getting married, there were a lot of things she and her fiancé had to consider. Building a business plan is sort of the same as building your wedding, so think about business planning like planning your wedding. When you plan your wedding you start with the big picture (your perfect day), you then break it up into its essential elements (venue, catering, photography, guest list, ceremony, budget etc.), you organize what needs to get done and in what order (book venue, decide on guest list, send invites etc.), develop a series of action plans (to do lists) and then delegate tasks to your team (unsuspecting family members). You monitor progress frequently and make adjustments to your plan as you go… but you never loose sight of the big picture (your perfect day).

If most people can plan their wedding day, why do most companies fall short when it comes to business planning? So, looking back at my sister’s wedding I came to think of 6 reasons why a business plan might fail:

#1 – The plan is too short sighted…

Most businesses lack a long-term vision of what they will become. Often business plans focus on achieving unrealistic short-term aims, without any perspective about where they want to be in the long term.

#2 – Biting off more than you can chew…

Many business plans fail because they attempt to take on too much at one time. To make sure you don’t choke, you need to break down your goals into bite size chunks. Think of your business plan like a meal (10 courses) that you enjoy over the course of the evening rather than a university burger eating competition.

#3 – The plan is too complicated…

A lot of business plans have too many moving parts. A breakdown in one part can cause the whole plan to collapse like a house of cards. Complicated plans that have lots of detailed and complex steps that take time to develop, are hard to communicate and harder to implement. The best plans are simple.

#4 – Focusing in the wrong thing…

Many business plans include initiatives that seem like a good idea, but at the end of the day don’t contribute much to the result you are aiming for. While working on these “seemingly good ideas” businesses are distracted from working on what really matters.

#5 – “Business as usual” takes over…

Many businesses are re-active in nature. When they get busy with the day-to-day “business as usual” activities, working on the business plan goes out the window. To successfully implement a business plan, you need to be pro-active. Being pro-active means taking a long-term view and making the implementation of your business plan a priority.

#6 – Poor Leadership…

Poor leaders are those that lack vision and direction, and they place no value on strategic planning and fail to lead by example. At the end of the day, the buck stops with you.

If entrepreneurs and other venture seeking individuals keep these things in mind when building and organising their business plans, then they will be much more well-equipped to handle any unforeseen problems that may arise in the long or short term. Most entrepreneurs don’t get it right the first time. Just think about Steve Jobs. Why do you think he didn’t succeed with Apple at first? After all, he was one of the founders of the company.

Designing Business Models

Business Model CanvasFrom the two business models, “The Five Component Model” and “The Business Model Canvas”, I personally prefer the last of those two. You may ask why? Well, to me the canvas model seems more thorough. The model is based on research, and it is suggested that the model is made in teams. I see myself as a team player, and I like the idea that several people collaborate on designing a business model. The questions are fairly straightforward, yet very in-depth questions. They touch all segments of your business, creating a more thorough business model.

The two models are two completely different models. Here are two main differences:

  • The five-component model doesn’t include a representation of the main business goals, e.g. strategic business objectives, critical success factors and key performance indicators, which a holistic business model approach should include. The canvas model offer insight in many areas of business, including: customers, financing, infrastructure, and value-propositions (for example, overall customer experience and outcome)
  • The five-component model doesn’t have a clear cause and effect linkages between the competencies, desired outcomes and measurements. Thereby the business model can’t help with possible strategic decisions. The business model canvas is a better fit due to its in-depth questions, making it easier to strategize the decisions of the business.

To add to these differences, I’m a bit surprised that neither of the two business models includes corporate structure & responsibility, which, in my opinion, a business model should include.

A perfect example of listening to customers, and steer your business in a direction that serves what the customers want, is the Greif Packaging case. An internal entrepreneur decided to listen carefully to its customers. He saw there were unmet need and new sources of value to be accessed. Greif converted its business model into a “trip-leasing” company for special chemicals. Their customers didn’t want all the hassle of buying and owning steel drums; they just wanted to move toxic chemicals from A to B efficiently.

Speaking of changing a business model, it is also worth mentioning that businesses have the opportunity grow and expand their business through either franchising or licensing. The primary difference between a franchisee and a licensee is that franchisees can expect to have a much closer relationship with their parent company than their licensee counterparts. Franchisees typically retain rights to the parent company’s trademark and logo. This is important because it is a visible representation of the connection between franchisor and franchisee.

In many ways, franchisees are the public face of the company and so their relationship with the franchisor will be close. For that reason, franchisors usually provide a certain level of training and support to franchisees and their employees. Franchisees can also expect a certain amount of territorial exclusivity as well as controls over the products and services they offer.

The relationship between licensees and the licensing company is looser than the relationship between franchisors and franchisees. In most cases, the licensee does not retain rights to use the company’s trademark. Instead, the licensee is expected to establish its own identity in the marketplace.

Similarly, licensees usually don’t receive exclusive territorial rights. This means that the licensing company is free to sell similar licenses and products to other people in the same geographic area. Licensees also don’t receive much in the way of training or ongoing support from the licensing company.

On the upside, license opportunities are often less expensive than franchises in both the upfront investment and ongoing fees. Once the licensee launches the operation, the relationship with the licensing company is frequently limited to purchasing products whereas franchisees can expect to pay royalties on a go-forward basis.

The Art of Innovation

It’s easy to copy what is seen as working in today’s market. It’s a tough game, and anything you can do to help kick-start your new business, blog, WebTV show, podcast, service, product or digital magazine in a positive manner is understandable. However, I’m a big believer that the advantages of innovation in business go way beyond just doing well, or making money. It’s about creating the right kind of persona as an entrepreneur. It’s about moving and shaking in the right circles. It’s about “killing it” live on stage, in the boardroom, over the dining table, or on the golf course for that matter. The benefits of being innovative in the way you startup, grow and develop your business far outweigh the benefits you’ll enjoy by simply copying someone else’s idea, or model. I do see a trend of cutting corners, copying, etc. in various industries; for example, Uber was the first to offer an alternative to Taxis, and then along came Lyft and now Gett. There are always going to be those that copy and duplicate what you have done. Innovation is essential for everyone to evolve and grow stronger into a better society. Without innovation the world would run idle.

Innovation can help you discover what opportunities exist now, or are likely to emerge in the future. Successful businesses not only respond to their current customer or organizational needs, but also often anticipate future trends and develop an idea, product or service that allows them to meet this future demand rapidly and effectively. Innovation will help you stay ahead of your competition as markets, technologies or trends shift. Trends and technology are constantly changing, thus it is vital for any business to stay on top of their games to meet the demands of their customers.

Innovation is not only about designing a new product or service to sell, but can also focus on existing business processes and practices to improve efficiency, find new customers, cut down on waste and increase profits. This is also another way of how innovation changes. As new opportunities emerge so does the kind of customer that buys your product or service.

Constantly innovating and improving business practices is also likely to help you attract better staff members and retain more of your existing staff – something that is crucial to the long-term health and performance of your business. Having innovative and engaged employees are very important, without them you would not be able to exist.

I think the no. one thing why Dell managed to be so successful is that they were efficient. Michael Dell was spending time with customers to figure out exactly what they wanted before the product was made as well as offering customized orders. Listening to the customer ahead of time takes the guesswork and wasted resources out of the equation altogether. Other companies offered only one solution, whereas Dell told the consumer that they basically could “Have it your way,” in true Burger King fashion.

Are Entrepreneurship and Small Business different?

This is a tricky question. The way I see small businesses is their ability to create jobs, come up with new ways of doing old things, and help keep money in the local community. Without small businesses, we’d be in a bigger economic mess. Among people with small businesses, there’s confusion between the terms Small-Business Owner and Entrepreneur. Both can have small businesses, but they have different styles of leadership and thoughts on running their business.

My take is that small-business owners have a great idea. They solve a problem in their community. They know their business and target audience. They know what will make their customers happy. They serve their customers. They like to know what’s coming next and where it’s coming from. They make calculated decisions where the outcome is clear. The result may not be huge, but it will typically keep them moving forward.

Entrepreneurs on the other hand have big ideas. They dream big. They think big. They come up with ideas that haven’t been tested, diagnosed, or worked through. A lot of times they don’t even know if their ideas are possible, which gets them even more excited. They step out on a niche more often than not. They jump in with both feet knowing that if they put in their full effort, the risk will be worth it more often than not.

I’m sure there are other differences between being a small-business owner and an entrepreneur. That being said, I do not deny the fact that a small-business owner can be an entrepreneur and vice versa.

As I described earlier, an entrepreneur has big ideas and in my opinion he or she would limit the potential of the company or venture by always being in control. A great entrepreneur must be willing to take chances, and honestly, I think that’s what characterizes an entrepreneur in the first place. They like taking chances, so if I could see the potential of my company growing by delegating responsibility throughout the business, I would definitely do that. Some entrepreneurs even sell their business after a few years. I think I would be one of those entrepreneurs, who would gather a team of very competent people and let them run the show once I’ve set the course for the business, and then go on and seek new ventures.

I realize that growing a business face a range of challenges. As a business grows, different problems and opportunities demand different solutions – what worked a year ago might now not be the best approach. Some of the issues I think I would face a business owner or entrepreneur are:

  1. Keeping up with the market
  2. Planning ahead; and
  3. Welcoming change
  1. Business conditions change continually, so market research should be continuous as well. I could run the risk of making business decisions based on out-of-date information, which can lead to business failure. I’m a man of convenience, and once I feel everything runs smoothly I have a tendency to just sit back and enjoy the show. I know I would have to step up my game in a changing business environment in order to keep up with the demands of the market as well as competitors. Loyal customers can be quick to find alternative suppliers who provide a better deal.
  2. Market conditions change all the time, so I need to revisit and update my business plan regularly. At the same time, every business needs to be alert to new opportunities. There are obvious risks to relying solely on existing customers. I tend to be very optimistic and not plan properly. I might be wrong in my planning although I made the effort of planning ahead. Sometimes it’s not your fault either; there could be unforeseen circumstances that cause the failure.
  3. I know I need to be fully committed to my business strategy, even if it takes me out of my comfort zone. This may involve hard decisions – for example laying off people or switching business away from suppliers I have a good relationship with. I risk putting my business at a dangerous competitive disadvantage if I don’t have the guts to act so my business survives. I know myself very good, and I don’t like hurting people’s feelings.