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Brien Poffenberger: Building a better mousetrap

January 30, 2013|By BRIEN POFFENBERGER

I recently saw an article suggesting that business plans are a thing of the past — that somehow technology and the pace of change have rendered the traditional business plan obsolete.  Nothing could be further from the truth, especially in tough economic times. A business plan is a map — a GPS device, really — and like any good map, it shows you not only where you are going but how to get there. It anticipates needs, steers you around obstacles and shows you alternate paths. It prompts lots of questions and changes a bit with each new answer. Most importantly, it shows what success looks like and what it will take to get there.

Whether it’s a first draft of a big idea or a revision well after the company is up and running, an effective business plan is written for two audiences. First, it explains to would-be partners — be it your rich uncle or a multi-national commercial lender — what your business does. And whether you are borrowing money or selling shares, all your partners want to know the same thing: How is your idea going to make money? Even the most charming entrepreneur will have a tough time raising the needed capital without a well thought-out path to a return on investment. 

The second audience for a business plan is the team who writes it. A well-crafted plan forces a company’s leadership past the enthusiasm of the new idea and forces them to figure out how it will work. Every answer will prompt new questions, changing some of your assumptions and reinforcing others. A successful business plan imposes discipline on the sometimes unruly process of creativity, giving it shape and making it work in the real world. 

There is no magic to an effective business plan, no business school alchemy that spins ordinary ideas into gold. Instead, a successful plan describes a company’s operations, introduces its leadership team, outlines its marketing and shows how it will make money. Here is a quick guide:

Operations: Describe what the company does, the products and services it sells, and how it interacts with the customer.  No detail is too small. Capture everything you can, i.e. store locations, hours of operations, product lines, etc.

Management: Investors want to make sure that you and your managers have the skills to run the company, and so in describing the management team, inventory the required skills and match them with specific people. Investors prefer an “A” team with a “B” idea to a “B” team with an “A” idea.

Marketing: Think broadly here, and capture everything you know about the market, your competition, your target customer and how you plan to sell. Remember the four “Ps” of marketing — Product, Price, Promotion and Position/Distribution.  You need to be an expert both in what you are making and how to sell it. 

Finances: This is often listed last, but you should work on this section first. It tells you if the idea can make money. This section will have more numbers than words, and it lists all the expenses and all the sources of money, i.e. borrowing, investors and sales revenue.

Innovation and creativity will always be important in business, but so, too, will be a well-written plan that maps out your success. Build a better mousetrap, and the world might beat a path to your door — but not unless you have worked out financing, production, marketing, sales and distribution. All of those details will be in your business plan.

For more information on writing a business plan and other resources available to your company, visit www.hagerstown.org/Business_Resources/Resources.aspx.

Brien Poffenberger is president of the Hagerstown/Washington County Chamber of Commerce.





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