What's the best process for business planning?


2

So we're doing really well. Very exciting. Now we can start looking a little further out on our business planning and look for new markets, etc.

What's your process for taking an existing product and going through the process of evaluating prospective markets - sizing, competition, product changes, etc?

Planning Business Plan Business

asked Dec 1 '09 at 12:00
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Chris
4,214 points
  • It depends on your industry. What industry are you in? It is IT or software, a critical component of your plan should be TIME. Please specify. Thanks and good luck! – A. Garcia 8 years ago
  • We have a web application targeted at eBay Sellers. – Chris 8 years ago
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2 Answers


7

What we usually do is a Business Narrative and a Financial Analaysis.

Business Narrative: This is a 1-2 page whitepaper that details the business. It’s not an Executive Summary but more the genesis of the idea. The questions we ask when doing the business narrative are:

  1. Brainstorm about the opportunity: Write down as much descriptive words as possible.
  2. Name the opportunity: It makes it so much easier to remember if you name your potential business (like a project name)
  3. Describe the opportunity: Be specific about what you want to do and use the words from the brainstorming session.
  4. Describe why your company can win: This is important since a good idea without the ability to execute is just a pipe dream.
  5. What is the target market? Clearly define your target market so that anyone can understand it. The more narrow the better.
  6. Who are the customers? Within the target market, who will you sell to? Be specific as you can and try and confirm your assumptions.
  7. What pain does the product/service cure? Be specific as to the features/functions that matter.
  8. What are the 3-5 years goals for the opportunity? Goals can be market share or revenue or whatever.
  9. What are the resources required to make the 3-5 year goal? Goals without resources does not fly. This is also a good way to gauge if your company can even do the job (a different way to say #4).
  10. Summarize why your company can pull off the opportunity. This would be like an elevator pitch. This should jazz people up. Once we have those questions answered, we assemble it into a short whitepaper. If the narrative hangs together, we then go to the next step, Financial Analysis.
Financial Analysis: The most important thing is to be consistent in how you evaluate different opportunities. At this stage, we want to see if the assumptions in the narrative are valid. We also want to compare this opportunity to others we have in the pipeline. The steps we follow are:

  1. Gather Industry Data: Just the basics like Total Available Market and any sub-markets you are interested in. Competitors are also good to identify since that helps with ASP modeling.
  2. Mock Up an ASP/Revenue Model: It’s important to get a sense of the business opportunity. This could be a total Swag but you need at least a starting point to poke holes at.
  3. Swag the Development Costs: This should be straightforward if your company has built stuff before.
  4. Calculate ROI and IIR: Return On Investment is great for evaluating different projects while Internal Rate of Return is a good measure of your use of capital (but not for side by side comparisons of projects).
  5. Adjust the Narrative and Add the Model Results: Add the financial analysis into the narrative and adjust anything that you have found during your research.

I know this seems like a lot of work but after a bit of practice, it gets pretty easy. We have templates for the analysis and sometimes as we answer the questions above, it becomes clear that it’s not worth it. This whole process takes a couple of days to a week, depending on how experienced the biz dev or marketing person is. I can tell you that we have eliminated a lot of Turkeys by following this process and being fairly rigid on our criteria for a good opportunity.

answered Dec 2 '09 at 03:32
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Jarie Bolander
11,411 points
  • Great answer. It's obvious that it comes from experience and not just opinion. – Michael Trafton 8 years ago
  • I'll second that. Fantastic answer. I think you've scared away everyone else from commenting! – Chris 8 years ago
  • It's possible that you share this template ? – Agusti N 6 years ago
  • @Agusti-N. If you Google business narrative, you will get a list of examples and templates. The answer above is from my blog about Business Narrative's (the link should be on the first page). – Jarie Bolander 6 years ago
  • @Jarie Bolander, thanks. Your answer it's really good and help me so much ! – Agusti N 6 years ago
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0

One link I've been sharing with people on this topic is this story of the Redfin early biz plan from Guy Kawasaki's blog: http://blog.guykawasaki.com/2007/10/financial-model.html#axzz0Ydt3vfKN

answered Jan 5 '10 at 05:11
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Neil La Chapelle
51 points

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