Business Plans and the Invisible Business Model

There have been many developments made in recent years in the development and explanation of a start-up’s business model. Why is it that business plan templates and business planning software ignore these developments? This leads to sub-optimal business plans that don’t communicate as effectively as they should.

The old paradigm

The 4P’s of marketing have been very effective over the years, however they no longer adequately explain the complexity of business models that are evolving as a result of the Internet. This old paradigm was developed in a different era and unfortunately seems to form the basis of all the existing planning software and templates available globally. Some leading consultants are moving beyond the limitations of these approaches, however very few business owners and founders have access to this technology. There is an increasing need for founders to explain their business model in terms that others can understand. These business models are not always oriented around profitability but may be oriented around the growth of a network of users.

The interplay of relationships and interconnectivity of businesses as increased dramatically over recent years. Specialisation has played its role in creating a more interconnected series of relationships between people within the marketplace. Existing software and templates do not adequately explore these relationships and the interplay between profitability and revenue.

Towards a new paradigm

In defining a business model, it should explain the relationship between an organisation’s strategy and the financial outcomes, in other words it outlines how the strategy is translated into cash. This is a particularly important element of a business plan from an investor’s perspective.

Many recent developments by a leading figure in business model design have fundamentally altered the structure and nature of a document. Leading investors are well aware of these improvements in the process however many of these improvements have not yet filtered down to business founders and even consultants providing advice in this space.

There are 9 key business planning elements that must be specifically addressed in order to articulate a business model. The founder must take the reader through a journey between each of these 9 elements. At the heart of a good business model is a value proposition. In modern planning the value proposition should replace the vision and mission statements used in traditional business planning approaches.

Not only do each of the 9 elements need to be considered independently, but the interplay of these activities needs to be carefully monitored.

Small Business Ideas – Location and Common Sense

Is going into small business talking small? The answer is yes and no, depending on how, what and where you are establishing the business. Some small businesses can really be capital-intensive so you have to put up a decent sum to get it up and going. You can invite friends to invest in the business. They might come in if the business idea is promising enough.

Small business in the real physical world is not for guys with really “small” capital. You will need a space that will house your small business. However small that may be, it still costs you money in monthly or weekly rentals. And there are utilities like communications (letters and telephone, at the very least), electricity and water. That is why start-ups like to think small for their first ventures.

Even with a good business idea and capital investment counterpart from friends, miscalculated assumptions in the business plan can easily shoot the small business down. Professional help on business planning and during the initial stages of the operation can help and take the business afloat but it should start to make real profits within 3 years or under. Enough working capital should be handy for at least 2 production cycles so that sales in the first cycle can assuredly cover a third as your buffer cycle. A dynamic mode of management and operation is vital for the first year of operation as there are real “new” discoveries that could not be covered and known specifically in the business planning phase.

Shifts in the industry environment are another thing to be vigilant about. In the business plan, these are considered as “ifs” in the list of assumptions but under the general category of the “yet unknown.” Allowances in cash-readiness and operational adjustment readiness cover this area but are harder to confront in actual operational mode than when it was tackled in business planning. Hard facts have real impacts.

That is how it is in the real physical world of business. When you get wounded, it really hurts. It is not for the faint-hearted.

Small businesses on the web, however, are an entirely different thing. They have as much chances as large-capital operations. The key success factor in an online small business is the business idea. Web business technologies abound in the internet. It is just a matter of marrying the strengths of a few of these web technologies and the small but knowledgeable start-up can suddenly grow big. Examples of these businesses are social networking websites. They get to earn millions in advertisements alone.

But beware of scammers on the web. They are also more deadly than in the real physical world. Don’t forget to always bring your common sense with you.

6 Steps to Improve Profits Through Business Process Redesign

Today the business landscape is constantly changing. With internet applications such as social media and company web sites, potential buyers are leveraging their shared knowledge and demanding faster service and lower product prices. Consumers can be fickle so the business owner faces the challenge of reacting quickly to these pressures while dealing with relatively fixed product and labor costs. One method to respond to market forces is to install a culture of constant improvement. Business process redesign has become the business owners’ go to method to reduce the cost of handling products or services.

There are defined steps that the business owner can take to redesign a business process that can install a mindset of constant improvement in their employees.

Step #1 – Define the Objective

In many cases the objectives are customer driven. These objectives can be varied from the time it takes to ship an order such as “orders placed before 10 a.m. will ship the same day”. It can involve a timed response, such as “delivered in 30 minutes or you don’t pay. Services can be guaranteed for 90 days or 6 months whatever the business objective demands. In all cases any process change must be supported by the business owner or management team to ensure that the new objective of the business process is aligned with the overall business vision or strategy.

Step #2 – Study the Process

Once the project has been approved a project team consisting of individuals involved in the business process under review, now starts their work in an organized manner. They must first describe in detail the current process. This is critical to ensure all steps of the process are reviewed for accurate reporting and maximum improvement. Next the team must collect detailed data at each step of the process to validate the time taken. Then the team identifies the areas where they believe improvement can be made and possible obstacles to achieving that improvement.

Step #3 – Recommend Improvements

Based on their finding the project team now focuses attention on how to improve the process. This could involve a few recommendations to remove barriers to success. At this stage the costs to make the recommendations is provided by the project team. This could involve the addition of technology into the process, such as tablet computers or tools or machines. A return on investment business case should be included where capital expenditures are required.

Step #4 – Decide

The business owner and management now review the proposals from the project team.

Each proposal must show how it addresses the improvement of the business process and the costs required to implement the change and any going cost savings.

In addition the implementation time and schedule including training must be shown to set a clear objective for completion of the process redesign.

Step #5 – Implement

Once the new business process redesign has been chosen, then the team must implement the changes in an agreed time frame. In addition, a process champion should be selected from the project team to be the single point of contact for questions and monitoring the new business process.

Step #6 – Follow up

There should be follow-up reporting on the new design, including feedback from internal and external stakeholders. By assigning a process champion the business owner begins to install the mindset of constant improvement amongst his team. Eventually improvement becomes a way of thinking and the company can create internal change to reduce costs and improve processes without external forces acting upon the organization