THE NEW STANDARDS FOR BUSINESS PLANS

Article by Herb Rubenstein,
Founder and President, Herb Rubenstein Consulting

Introduction

Today, business plans are funded at the rate of 1 in 1000. How does a good business plan defeat these tough odds. This articles lays out some of the basics regarding writing business plans and makes critical distinctions needed today in this tough business climate.

Research, Facts and Value

A business plan must a well researched, fact based document. Poor business plans make great leaps from assumptions to projections. Excellent business plans are based on voluminous data on the cost of every element of the service or product to be offered, identify exactly the customers who are expected to buy the products or service and the quantity of expected purchases over the next several quarters or years, plus include research findings on similar products and competitors. Today, new products and services must meet the 10x rule – they must be 10x better than the current services or products on the market in order to be assured of success. This 10x superiority must be demonstrated with facts and statistics. And, a good business plan must state clearly how the idea or service of the new company is proprietary and protectable through the intellectual property laws, trade secret policies and will prove to be very difficult to reverse engineer.

Competitive/Market Analysis

A good business plan must make predictions not only about its success and how customers will respond to it, but must also make predictions on how competitors will respond to the company's success. The more citations to other research on every element of the plan the better and the closer the conclusions are to being fact based rather than assumption based conclusions the better. A good business plan must show the relative prices of competitive products and services, their names, their size in the market, an objective measure of the value of their products and services and must show that your product or service is demonstrably 10x better than another product.

Three Financial Scenarios

A good business plan will present three scenarios of potential financial results and show how the company will survive if the worst case scenario happens. A good business plan will identify the management team in great detail and show the gaps. Rather than merely state that there is a gap, a good business plan should say, here is the gap and here is a person whom we would hire or like to hire to fill the gap upon funding.

Sales and Marketing Costs and Revenues

A good business plan on the sales side must state why it expects to secure x amount of sales in y time. Have other companies done it? A good business plan must take into account actual experience based data on the sales cycle and the full cost of securing large clients.

It has been estimated that to sell anything to Fortune 500 companies in this business environment takes $100,000 in sales, marketing, advertising and related sales support to actually make a sale to your first Fortune 500 customer. Certainly, after five or ten sales to Fortune 500 customers, the per customer will go down, but it is almost always well in excess of $10,000 per Fortune 500 customer. The sales cost projections in a good business plan must reflect the reality of this new sales and marketing environment.

Conclusion

This new reality of the business landscape may seem harsh, but it is better to get the plan right the first time than waste three years chasing investments that will not be realized until the business plan meets these new standards.

Biographical Information

Herb Rubenstein is an attorney and the CEO of Herb Rubenstein Consulting, a leadership and management consulting firm. He is co-author of Breakthrough, Inc. – High Growth Strategies for Entrepreneurial Organizations (Prentice Hall/Financial Times, 1999). His email address is herb@herbrubenstein.com and he can be reached at (301) 718-4200 in Bethesda, Maryland or (202) 236-7626 in Washington, D.C.

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