Help! I Need a Better Business Plan!

On the face of it, a Business Plan should be relatively straightforward:  an executive summary, a company description, market research and information, marketing and sales data, and financial projections.  So how come so many business plans miss the mark?

Anyone who’s done Business 101 knows the basic elements of a Business Plan, and anyone who has looked into starting their own venture or sought investor funding has tackled the challenge of writing their own plan – yet so often business plans fail to reach their intended goal.

A business starts with an idea – a seed – but that idea only yields fruit if it’s planted in the right soil and given the right growing conditions. In other words, an idea – even a great idea – isn’t enough if it doesn’t have a market, a realistic plan to reach that market, and an effective team to execute that plan.  Most business plans fail not because the idea isn’t great, but because the marketing and financial elements are unrealistic or because the team fails to execute effectively.

Think back to the dot-com bubble – the bursting of the bubble was caused by the huge investments and overvalued stocks in dot-com companies based on little more than a basic idea, the overblown hype surrounding the potential of customer acquisition through the internet, and the success of a few key players (Google, Amazon).  The reality was that most of them never actually had sound enough business models that would actually generate business in real terms – and ultimately yield profits for their investors.

So while to you the most interesting part of your business plan is the idea itself, to your potential investors, the most interesting part is the return on their investment.  Regardless of how novel the product is, the real value to the investor lies in the business plan answering some very key questions:

  • How large is the market and is it a growth market?
  • How do you plan to access the market?
  • Do you have a sound, sustainable business model that can yield a return on my investment?
  • Is there a potential exit strategy for me?

So how do you put together winning data into your Plan?

First of all – make sure your research is thorough and valid! Just as your product should be proven and validated, so should your market and financial data. While some assumptions are acceptable, they should be based in “what is” not on “what should be”.

Industry Background: When you describe your industry make sure you include its current size and projected growth rate, its characteristics, trends, and segments.  Once you have an outline of the industry, zero in on your specific target market or segment.  For example, if you are targeting the aviation industry, is your focus on commercial aviation, business aviation or military aviation? Are you focused on a specific region, aircraft type, service type, or business model?  If your focus is on the consumer side, which variables did you use to segment your market? Geographic segmentation? Demographic?  Psychographic?  Socioeconomic?

More importantly, look at your target market’s needs and how they are currently being met.  What is the size of the segment, who are the major and the secondary players in the industry, and how much share do you think you can gain? How do you plan to gain entry into this market? What is your value proposition and what are your proposed market channels?

Make sure you understand how you fit in the industry big picture, including barriers to entry, regulatory environment and in relation to the competition.  What are your competitors’ strengths and weaknesses and how important is your target market to them? If your target market is their primary source of income, then you can be sure that they will fight to maintain their position within the industry and they will have many advantages.  Do you have a strategy as the new entrant?

Remember that the more defined your target market (or markets) and the better you understand the competition, the clearer you can be in not only defining your market’s individual needs but also in defining your specific value proposition and target share.

Again – realism is the key. If the total market is $100M and there are 3 key players, each of which has 15% share of the market, then be realistic in your expectations: you are unlikely to gain 10% share in your first year of business!!   If you believe that your product is so great that your customer will want to use it on their equipment 8 times a year when the industry standard operating procedure calls for the process to take place 4 times per year, think again! Your sales projections will be severely off the mark unless you have a solid plan to change customer behavior!

Pricing & Profit Margins: Pricing and profit margins can often be a major pitfall when developing a business plan.  Make sure your pricing structure – including discounts – is clearly defined and that all relevant costs are included in your profit calculations. Too often, profit margins are grossly over-estimated as key costs are omitted from this calculation.   Make sure you understand both your fixed and variable costs as you develop your pricing structure and include a breakeven analysis so you truly understand where you need to be to start making a profit.  If your fixed costs are $7,000 a month, you will need considerably more than $7,000 in sales to break even, so make sure you include a realistic estimate of variable costs.

Business Model & Financial Projections:  Literature abounds with information on how much detail should be included in the financial projections.  What is just as important however, is the business model itself and the knowledge and ability of the management team to execute that model.  A good business plan presents the financial projections in multiple scenarios to show how the company would respond and the projections would be impacted if the expected market or environmental conditions were to change unexpectedly.

Think back to 9/11 – a day that not only changed history, but also changed the face of several industries. The aviation industry was changed virtually overnight: airlines and suppliers to the industry went out of business virtually overnight; new entrants came onto the scene; the regulatory environment changed.

While this example is extreme, outside events can – and do – impact a business: regulatory changes, new technologies, new competitors.  So a business plan should reflect a business model that can respond quickly to a changing environment.   William Sahlman, in his excellent article on writing a business plan, states that “a typical professional venture-capital firm receives approximately 2,000 business plans per year. These plans are filled with tantalizing ideas for new products and services that will change the world and reap billions in the process – or so they say. But the fact is, most venture capitalists believe that ideas are a dime a dozen: only execution skills count.”

Sahlman makes an important point: investors are inundated with ideas and business plans. What you need to focus on when putting together your own plan, is ensuring you have a sound business as well as a good idea.

As always, I’ll leave the final word to an expert, Joe Mansueto

“I found an approach to investing that made enormous sense to me: rigorously analyzing a company’s fundamentals, understanding exactly how it makes money, developing a view on the business’s future prospects, and deciding if it’s a good business.

5 Steps to New Product Development

By Dora Cheatham, Program Manager, Emerging Enterprise Center

New product development is often spoken of but seldom practiced. Yet it is a process that is all-encompassing, risk-averse and eloquent in its simplicity. When coupled with outstanding project leadership, it’s a winning formula guaranteed to yield results.


Too often, product development in today’s larger organizations is fraught with miscommunication, misdirection, lots of activity with little accomplishment, unclear goals. The end result is wasted time, effort, and sometimes a product that does not deliver on its early promise. An effective development process – my personal favorite is the stage-gate process – that is well executed and well led is critical in eliminating many of these problems, increasing speed to market and ensuring that the product under development continues to meet business goals and market requirements.

The 5 Steps of Development

Step 1: THE IDEA – The source can come from R&D (based on new technology), Marketing (based on market need or gap analysis determination), Sales (based on customer need) or Operations (based on a new process that offers manufacturing alternatives). Each idea should be screened to determine its overall viability before moving on to the next stage. Does it meet the company’s overall strategic goals? Business goals? Market development goals? Product development goals?

It is important to note that new product ideas are based on knowledge: customer and industry knowledge, technological and environmental knowledge. The sharing of knowledge between departments enables the connection of dots that may remain unconnected if left floating alone in a vacuum. R&D or Engineering may be aware of a new technology but unaware of a market application while Marketing may see a market need or application without being aware of the technologies available to meet the application. Manufacturing and operations should be aware of both market needs and trends as well as technological developments so that they, in turn, are well positioned with regard to resources.

Step 2: PRELIMINARY REVIEW – Technological, operational and marketing viability. What is the total market size and potential? What are the R&D cost requirements? What are the operational requirements? What are the ROI estimates? Are there any regulatory implications? Product and time parameters, including product functionality and attributes, estimated cost targets and market goals should be established.

Step 3: DEVELOPMENT – A step in which all departments – not just R&D or Engineering – should be involved with frequent communication and updates to ensure that the product criteria established in Step 2 are being met, and that the needs and timing remain unchanged. If at any point during this stage there is a change in product scope, cost or timing, then a review of the business case may be warranted to determine if further development should continue or expectations should be adjusted.

Step 4: TESTING – A critical part of the process since this will validate the product or determine if additional development time is requirement. If possible, testing should be completed in partnership with a launch customer as this offers external as well as internal validation of product performance. This step will also determine if the product continues to meet the criteria and goals established in Step 2, or if these criteria need to be re-evaluated and/or adjusted.

Step 5: COMMERCIALIZATION and LAUNCH – Production ramp up and marketing plan. Are all the operations pieces – from part numbers to purchasing to production – in place? Are all regulatory pieces (if applicable) in place? Does the sales team have everything they need – from marketing materials to samples to trial protocols to industry context – to sell with confidence? Again, all departments should be involved in the commercialization process to ensure that all elements of the Commercialization and Marketing Plan are orchestrated for a flawless launch.

Effective Project Leadership is a Must

The above notwithstanding, it is not enough just to have a good process in place. The keys to a successful new product development process are project leadership and execution, as well as cross-functional involvement and contribution at all stages of the development process. Effective leadership ensures:

  • Regular communication across all disciplines at every step of the process;
  • That the product continues to meet all criteria established at Step 2 of the process;
  • That the activities engaged in the entire development process add value to the overall innovation strategy;
  • That – once commercialized – momentum is maintained to ensure that the product yields the expected results.

Too often, a process is put in place but is poorly implemented or poorly led, and therefore fails to yield the desired results. Like any process, success depends on keeping the end in sight, and in this case the end does not finish with first piece approval. Frederick W. Smith said it well when said:

“Leadership is simply the ability of an individual to coalesce the efforts of other individuals toward achieving common goals. It boils down to looking after your people and ensuring that, from top to bottom, everyone feels part of the team.”

Creating and Selling Value: Creating Value: Sales & The Value Pyramid

By Dora Cheatham, Emerging Enterprise Center

Going from supplying a product that meets basic customer expectations to contributing to a client’s organization can be hard to establish and even harder to maintain, but is an invaluable strategy for long term profitability. Keeping a customer requires the creation of a relationship of mutual trust and partnership that goes beyond supplying a quality product.

Seeking to create value and a sustainable competitive advantage is increasingly difficult in today’s data-filled environment. Buyers today are educated and savvy. In the B2B world, the buyer can be 60-65% through the purchase process before he or she even makes contact with an incumbent or potential vendor. They know what’s out there and what it costs so if all you have to offer is a product that meets specifications, then you have effectively created a situation where your only option is to sell on price—and the lowest price invariably wins. That also means that as soon as a competitor emerges with the same option at a lower price, then chances are that customer is lost to the newcomer. So how can you ensure that your customer remains loyal to your product and business?

Smart Buyers Seek Value

A truly smart buyer understands the value of a vendor that contributes to the smooth running of his or her business. If you can deliver a flawless product, on-time, every time, with excellent customer service, then it behoves him to use your product—because spending time dealing with vendor-related problems and quality issues costs money and impacts his own customer service and bottom line (think about the UPS “I’m happy” ads where department managers and customers are happy thanks to UPS Logistics).

By supplying a quality product with excellent customer service you have already established some level of competitive advantage. And many companies today provide good products with good service – it is a prerequisite to staying in business. To sustain that advantage however you need to continually climb the value pyramid and add to your product in terms of additional service and knowledge, eventually making a quantum leap to the peak of the value pyramid to establish yourself as more than a vendor, but a trusted strategic partner.

Can you help lower your customers’ costs or improve their productivity? Can you help them identify new products or markets? At an even broader level, can your customers call on you for advice on operational systems and processes or strategic direction? In other words, does your customer consider you a supplier or a partner?

Schematic adapted from Doyle P. and Stern P., Marketing Management & Strategy, 4th ed., Prentice Hall


As you climb the value pyramid, commoditization decreases and company and product value increases, with fewer competitors able to compete at the same level. The fundamental difference between the lower and upper levels of the pyramid is distinct: to be good at the former, the salesperson and business needs to have a top quality product to sell and needs to understand his product and his own business well.

To be good at the latter, the salesperson and business needs to have an understanding not only of his own product and business, but of his customer’s business as well. He needs to understand his customer’s individual and industry needs and must excel at consultative selling, offering solutions that are of mutual benefit to both organizations. Only then can you hope to ensure an enduring partnership and long term rewards.

You don’t close a sale; you open a relationship if you want to build a long-term, successful enterprise. Patricia Fripp.