Making Business Plans Make Sense


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English: business plan

Business Plan Spreadhsheet

Does your business plan make the usual mistake – focussing too much on money, and not enough on market? Do you add up the numbers without really understanding the assumptions? Most people do. Do you set the rules about what you will, and won’t do, before you start the plan. Most people don’t.

In which case, the business plan loses all relationship with what’s going to happen, and any value as a management tool. It’s relegated to fairy tale status. Your plan might satisfy an investor at start up, but will it survive the first review? Will you survive the first review, if you can’t explain how what actually happened differed from the plan, and what you’re going to do about it.

In business planning the spreadsheet should be the result of strategy, not what drives it. Get the strategy sorted out first and then use the spreadsheet to calculate the finances. Here’s an example of how a landscape gardener might write a business plan which makes sense as a management tool.

It’s important to begin with basic principles. That’s the way he’ll avoid the majority of business risks. He’ll base his plan on a list of things he won’t do, under any circumstances – risks he won’t take, or compromises he won’t make. For example:

  • Borrow to invest
  • Work on a Sunday
  • Accept work beyond his competence
  • Mislead customers
  • Be late on the job
  • Extend credit

Next he’ll define his resources, and capability to create value. What is it he can do to make money for customers, and take a share?

  • Skilled staff
  • Machinery
  • Expertise in design, landscaping and plant selection, and water features
  • Consulting capability
  • Within 10 miles, attend site before 8.00am
  • Start new projects within 4 weeks

Next he’ll define his ideal customer, his value proposition and his operating model. Once he’s decided what he can do (having ruled out what he won’t), who he can do it for, and how he’ll explain his offer, the next job is defining the market, unique sales proposition, and sales approach.

Only at the end of this process will he be able to start putting numbers into spreadsheets.

Our notional business hero might come up with something like this:

1. Within a 10 mile radius there are 1,000 homes and business locations worth more than $500,000, each of which spends on average $10,000 per year on expertise like his. That’s an annual market of $10 millions.

2. Some existing service providers leave customers dissatisfied because they get to jobs late and employ unskilled workers. He can compete for and win 20% of the total market.

3. His resources compare favourably with other providers for homes with water features in their gardens so he’ll target those with a proposition highlighting that as a USP.

4. He decides to dominate the high value add sector and to do that chooses a sales process which starts with a free assessment and fixed cost proposal.

5. He targets annual revenues of $2 millions at a profit of 15%.

Now he can set about his cash forecast, understanding which parts of his strategy drive which numbers. He’s equipped to change the strategy if and when the numbers start going wrong.

Following this approach our virtual entrepreneur benefits from a number of advantages, each of which adds to his chances of success.

He’ll know when to walk away, from a job, from a market, or even from the business itself. He set the rules about what he wouldn’t do. Now it’s easy to stick to them, and not be diverted by

He’ll know exactly which customers to target, with which proposition, and how to turn the interest he generates into profitable business.

Finally he’ll know how all that adds up to the numbers, and where to look when those numbers don’t add up.

He won’t need management consultants, because he’s adopted Fayol’s principles of management – Forecast, Plan, Action, Review, and repeat. In fact, if the landscape gardening idea turns out to be a pipe dream, he can set up as a management consultant.

Republished with author's permission from original post.

Steven Reeves
Consultant, author, software entrepreneur, business development professional, aspiring saxophonist, busy publishing insight and ideas. Boomer turned Zoomer - thirty year sales professional with experience selling everything from debt collection to outsourcing and milking machines to mainframes. Blogger at Successful Sales Management. Head cook and bottle washer at Front Office Box.


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