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Monthly Archives: August 2016

The Simple Business Plan

In a world of increasing complexity and one with growing demands on our time, it can be challenging to create a business plan. In recent years, however, there has been a growing trend  in the production of simple business plans.

What is a simple business plan?

A simple business plan is a business plan typically produced by start-ups. You write your business plan as normal but you reduce the breadth of content in certain sections of your business plan.

Why would I write a simple business plan?

Simple business plans are appropriate when there are a lot of unknowns or when you are simply at the idea creation stage. At this point you do not want to invest significant time and resources in a full blown business plan, but are looking to produce a business plan that will enable you to forward it to interested parties for further consideration. Once you have received feedback you can then proceed with a full blown business plan.

What does a simple business plan contain?

The simple business plan contains much of the same content of a standard business plan but certain sections can be put on hold at this point e.g. cash flow statement, balance sheet etc. Sections can be skipped and a greater emphasis can be placed on the idea, the market opportunity, the likely demand, the routes to market etc

What is the point of a simple business plan?

One frequent problem entrepreneurs have is that they can keep ideas ‘in their head‘ rather than commit them to paper (or to a PC). However, ideas are practically worthless when they relate to a product or service in isolation (or without providing a market and commercial context). By producing a simple business plan, the entrepreneur is taking the next step towards their idea reaching fruition.  A simple business plan will ensure that there is a holistic view of the business opportunity and an assessment of whether it is commercially viable or not.

How do I create a simple business plan?

Business Plan Pro has the option of a simple business plan built -in. By selecting the option within Business Plan Pro, the number of tasks you need to undertake is reduced from the number needed to produce a standard business plan.

Multiple Intelligences

 Everybody has a different approach to learning and the more we understand about the type of learner we are, the more effective our studying should become.

Howard Gardner first introduced us to the idea of Multiple Intelligences in 1983. He believes that there are several types of intelligences that can’t be simply defined from one IQ test. He categorises intelligences under the following headings;

1.  Verbal linguistic – having a good verbal memory, being interested in words and how language works

2.  Analytical / logical – being able to investigate and have a scientific approach to learning

3.  Musical – being sensitive to sounds and rhythms

4.  Visual spatial – being imaginative with a good visual memory

5.  Kinaesthetic – being receptive to touching objects to enhance your memory

6.  Interpersonal – being good in group work, listening to others

7.  Intrapersonal – being aware of your own personal goals and motivations

8.  Naturalist – understanding the link between nature and humans

It’s important to understand that these intelligences work together and it would be unwise to think of ourselves as having only one or the other. Labelling learners as a particular type of learner could stop them from exploring all of their intelligences. So instead we should think of ourselves as having dominant intelligences.

When you are next in a classroom ask yourself these questions to think about how you learn:

  • When I hear a new word do I need to see it written down to know how it’s spelt?
  • Am I interested in grammar and how English tenses are put together?
  • Are my notes kept neatly in a methodical way?
  • Do I keep a personal dictionary of newly learnt words?
  • Does my personal dictionary help me to remember the words?
  • How easy do I find it to hear differences in sounds?
  • Does drawing pictures of new words help me to remember them in English?
  • Does touching an object help me to remember what it’s called?
  • Do I enjoy listening to the teacher and taking notes?
  • Do I prefer working on my own or with other people?
  • Do I know why I’m learning English?

This list of questions is obviously limited but it’s a good start towards becoming a more effective learner. The more you are aware about your dominant intelligences in the learning process the more you can exploit them to make learning a more enjoyable and rewarding journey.

Business Plan Vs Business Model

 A business plan is essentially a more detailed version of your business model. A business plan has been traditionally understood as a physical document, although increasingly this view has changed as business plans have migrated online. The business plan format very much depends on the context and business plans are often verbalised via presentations where a presenter pitches their business plan to an audience. Business models are more likely to take the form of either simple verbal descriptions or one page visual representations which can either be produced before a business plan or as part of the same planning process.

It is also worth noting that there are increasing numbers of business plan critics who argue that their composition is too time consuming and that people need ‘to get building’. Some of this criticism has come from software developers (many of whom are proponents of the Lean Start-up Methodology).  I personally feel their arguments are a little simplistic and that entrepreneurs need to map out a viable business model and a business plan in tandem. I also think that the arguments are more valid in an Internet business context, where it is relatively easy to bootstrapa low-cost website which can be used for feedback and constant iterative development.

If you are looking to build a new business and are about to draft a business plan, you should also spend time working out your optimum business model as well as drafting a visual representation of it.  You can use the following framework to map same. In recent years there has been significant innovation in the range of business models, and some of them may be of relevance to your offering. Finally, it is also worth noting that some business models such as the Internet bubble model have largely had their day. Very few investors will invest in businesses these days that have advertising at the heart of their business model.

Uses for Business Models

1. Starting a new business
If you are starting a new business (particularly an Internet-based one) and are seeking investment, the business model will be an important element of your business plan. Any prospective investor will be very keen to understand your business model clearly i.e. how you intend to generate cash, and whether it appears that you can do so profitably.

2. Innovation and product design
Business model innovation enables you to take a holistic view of the business to assess unique opportunities that exist outside of innovation solely on the product side. Business models also jump industry so it is a good idea to keep a breast of innovative business models you come across (regardless of the context). One simple (yet common) form of innovation is deploying business models from another industry in your own. As Mark Johnson claimed in ‘Reinventing your Business Model’

The low cost business model pioneered by the likes of Irish airline, Ryanair (replicating the Southwest Airlines model) is now becoming more popular in the hotel industry, for example, where costs are being reduced significantly and entire business models are being reassessed. The CitizenM hotel in Amsterdam airport, in the Netherlands is one such example; staffing levels are far below industry averages as customers are forced to self serve.

3. Creating Revenue Streams
As I mentioned in the opening sections some Internet companies struggle to monetize their customer base. Their business model is effectively parked as a trade off to attracting ‘users’. The logic here is simple; if you offer a free service you remove the biggest risk or barrier to new prospects. Once you have significant volumes of users you can then create a business model to monetise this large user base.
Similarly, in the gaming industry ‘free to play’ has been a popular model where users play the games for free but pay to acquire virtual goods be it tools to play the game better e.g. buying weapons or multiplayer access.

4. Competitive Analysis
A traditional means to assess the attractiveness of an industry was to undertake strategic analysis using the methodology prescribed by Michael Porter in his Five Force Analysis. His core argument was that these following five forces determine the competitiveness of an industry and hence its attractiveness:

  1. The threat of the entry of new competitors
  2. The intensity of competitive rivalry
  3. The threat of substitute products or services
  4. The bargaining power of customers (buyers)
  5. The bargaining power of suppliers

Understanding businesses from a business model perspective can also be extremely instructive as you can build up a narrative regarding how companies perform certain activities to gain a clear understanding as to their strategies. Using this in tandem with Porter’s Five Forces will give you a good sense of the competitive landscape which can then help you decide on the optimal strategy to pursue and also to preempt competitive threats.