Posted by: Joe Hoffman | January 31, 2008

Why Plan?

I had the great and good fortune to speak with a recent grad from the class room phase of the program today and learned that some of the lessons were bearing fruit. This person had worked hard building a pretty good business plan with sound financial models to support it. Just prior to submission to his first lending source he, in turn had the good fortune to stop at one of his competitors operations and that started a whole chain of re-thinking.

The outcome of that one brief stop was that he was able to reduce his initial outside capital requirements by 43%. Not only that, his new number would give him an additional full quarter of cash burn.

The short story is that he realized hat he had some upside pricing room of about 7%, and that triggered the process of re-evaluating several parts of the plan. He made a minor change to the opening promotion, a new cost analysis of the facility improvements requirements and he pushed out some project enhancements by a couple of months.

By having a solid plan in place already, he could make adjustments quickly, and observe the bottom line impacts immediately. In this case, the core elements are not changed; it is still the same concept with better pricing, the same presentation with some fluff pulled out and a much more attractive financial package overall.

So, two lessons from one event, market research never stops and it includes the most mundane of experiences and don’t assume that your current business plan is as good as it gets. There is a third lesson as well; stay focused on the key drivers for your business, but that is a discussion for another day.

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