Wednesday, November 27, 2013

AudioTech Summary of "The One-Hour Business Plan™: The Simple and Practical Way to Start Anything New"




by John McAdam
A summary of the original text.

The One-Hour Business Plan, summarized by arrangement with John Wiley & Sons, Inc., from The One-Hour Business Plan:  The Simple and Practical Way to Start Anything New by John McAdam.  © 2013 by Pioneer Business Ventures, Inc.
In this summary...

·                  Learn how to create a business plan foundation to take your innovation to market in just 60 minutes of writing time.
·                  Improve your chances of survival by focusing on the "five essential business plan cornerstones" that serve as the foundation of any successful business.
·                  Create a strong value proposition by evaluating customer needs and developing a solution that offers compelling features, benefits, and advantages.
·                  Identify your most direct competitors by preparing a competitor table before offering your value proposition to prospective customers. 
·                  Understand how to set milestones and action plans to guide your business, and how to predict how much money you will make.
The One-Hour Business Plan
More than 50 percent of businesses fail within three years of their incorporation date.  Why?  In many cases, they fail because they lack a strong business plan.  
It might seem impossible to write a complete business plan in one hour.  But what you're about to learn is how to create a business plan foundation in one hour of writing, not thinking, time.  Then you will be in a unique position to test your offering, refine it based on customer feedback, and go to market with an offering that is better prepared and more likely to survive.
Within the hour of writing time, you will answer five questions that focus on the five essential business plan cornerstones.  They are:

1.              What are you offering?
2.              Who are you offering it to?
3.              Who are your competitors?
4.              What's next? 
5.              How much money will you make?

By addressing these five questions, you will be able to:

·                  Create a value proposition that makes a stronger business model.
·                  Determine your customer target audience and reach your most receptive market.
·                  Examine your proposal through a critical customer's eyes.
·                  Set milestones and action plans to guide your business.
·                  Predict how much money you will make and how successful your business will be.
These are the most important components for a business plan foundation.  Anything else will compete for your time and energy when you are innovating something new or writing a business plan. 

Module 1: What Are You Offering?
value proposition is a statement that summarizes why a consumer should buy a product or use a service instead of other similar offerings.  It is the starting point for the business plan. 
To describe the value proposition, you'll need to identify the need, solution, feature, benefit, and advantage of your value proposition.
First, what is the need being filled?  What void does your product or service fill that is not currently being satisfied adequately for customers?
Veteran entrepreneurs understand that paying customers mean everything to the new venture.  They get the value proposition in front of the customer target market for feedback, evaluation, and purchasing decisions.
The caveat is to avoid perceiving a need that the customer does not value.  Avoid the "solution looking for a problem" syndrome, in which the entrepreneur believes there is an obvious need, while the customer does not care enough about the problem to value the offered solution.  
To avoid this syndrome, the existence of a need matching a valuable customer solution must be created, tested, and refined before significant time and resources are deployed to offer it to more target customers.  Otherwise, you will waste time, energy, and money.
To establish that the need really exists, answer the following questions:  

·                  What is not happening in the target market today that should be happening?
·                  What potential customers have you spoken with about these needs and your solution?  
·                  What was the feedback? 
·                  Where is the void in the solutions being offered now? 
Think about how customers in your target industry interact.  What events, behaviors, and conditions lead up to the need for your product or service?  Ultimately, what need does your product or service fill?    Verbalize the need out loud.  Does it sound meaningful for potential customers?  Restate the need, this time making it both clearer and more precise.

Once the need is clear, it's time to focus on the solution.
Keep in mind that the solution your target customers want might not be the one that you have the most fun creating, or be the easiest, or the most cost-effective for you to deliver.  Your work experiences might unnecessarily limit your creative thinking toward a solution.
Your eye should be on the prize—the customer.  Better still, you must look through the customer's eyes.  What do you see?
A quality entrepreneurial solution begins objectively, with the customer's needs in mind.  What is the solution for the need that solves an important problem for your target customer?  
Think about your solution now and verbalize it out loud.  Repeat it for brevity and clarity in a way that people outside the industry can understand.
The solution will include both features and benefits.  It's important to understand the difference.
The features of the offering are tangible descriptions of the product or service that can be seen or touched.  Some customers study features in an effort to compare one offering to another.  Therefore, the distinguishing attributes of the features are the most important to describe, as they enable an offering to stand out in a crowded marketplace.
Examples of features commonly seen in commercial advertising include:

·                  Larger screen size
·                  Open 24 hours
·                  Custom purchase programs
Customers, however, are more interested in what the offer does for them than they are in what the offering does.  They wonder, "What do I get from this?" 
To highlight what the offering does for the customer, the benefits need to be explained.  Benefits are intangible experiences that the customer values as a result of using the product or service.
What is the difference between a feature and a benefit?  

·                  A feature is tangible, while a benefit is intangible. 
·                  A feature describes what the service or the product does, while a benefit portrays what the customer gets.
Another way to view benefits is to explain them as natural extensions of features that the customer enjoys.  For example, the benefits associated with the three features listed earlier might include:

·                  larger screen size on a smartphone saves you the time and annoyance that squinting and slowing down to read text on smaller screen sizes entails.  
·                  A grocery store open 24 hours a day provides convenience for you to shop when your schedule permits.  
·                  Custom purchase programs allow you to save money by purchasing only what you need, not more than you will use.  
Customers are more interested in benefits than features.  A benefit created by viewing your prospective customer's needs generates value.  Therefore, focus on the benefits to create your distinguished value proposition for your customer.
Think about the tangible features of the product or service and verbalize them out loud.  Mentally list the benefits that the customers receive by using your product or service.  What is in it for them?  What are the most important benefits that your customer receives?
To describe the advantages of a value proposition offering, you need to get inside your customers' heads and predict how they will view the purchasing decision after understanding your value proposition.  A customer normally has multiple choices to make when purchasing among competitors or competitive substitutes.  
Competitive substitutes are products or services that can be purchased that might not be close to what you are offering, but are solutions that fill the need or solve the problem in the customer's opinion.  Therefore, they are significant and must be considered as you draft the value proposition.  
We will go more into depth with competitors and competitive substitutes when we get to that critical section.  Here, you simply need a basic understanding of the competitive dynamic in the marketplace.
Who are the top competitors for your product or service?  What advantages does your value proposition offer over those competitors?
Think about these advantages objectively, like an industry analyst, without emotional attachment.  You will include them in the value proposition.
To stay on schedule for The One-Hour Business Plan, you now have 10 minutes to write down your value proposition before moving on to the next module.  
Here is a helpful worksheet for completing this exercise, but you can use any piece of paper, your phone, or your computer.  
The value proposition should be between two and four sentences in length.  Your task here is to write briefly and clearly, while including the five core elements of a quality value proposition:  need, solution, feature, advantage, and benefit.  They should not be separate sentences, but should blend together naturally.  
Once you've completed the value proposition, test it by asking these five questions:

1.              Does your value proposition mention the need for the offering?
2.              Does the solution focus on benefits for the customer?  Are the benefits natural extensions of the features?
3.              Are the advantages to primary competitors expressed distinctively?
4.              Is the value proposition brief, clear, and understandable to someone outside the industry? 
5.              Is this value proposition deliverable in 15 seconds during the course of normal business conversation?
You have to get your value proposition as clear, distinctive, beneficial, and intriguing as you can before we move on.  If the value proposition fails to express the benefits of what the recipient gets, then the rest of your business plan and business model will suffer greatly. 
The two- to four-sentence value proposition you've just written might not work for you in your industry in the sound-bite society we live in today.  The blunt truth is that businesspeople rarely give a damn about your features or how you do what you do.  Sometimes they don't even care about what you do.  
What most businesspeople want to know is what is in it for them.  What do they get?  
The next exercise is designed to be your default value proposition to communicate to your listener exactly what your customer gets and experiences by working with you.
This can be your value proposition when you are tired after a long day and must deliver it quickly.  In this exercise, you simply focus on the need and how the customer benefits from the offering. 
Complete these two statements by filling in the blanks:  "We work with people who need [blank].  This benefits them by [blank]."
Now test your concise value proposition by asking four more questions:

1.              Are you delivering it verbally in 15 to 30 seconds?
2.              Do you have any "and" clauses?  If so, you are probably rambling on and your listener is starting to tune you out.  Force yourself to remove these clauses.
3.              Are you communicating from your customer's perspective and not yours? 
4.              Have you committed your value proposition to memory so you don't have to read it?  
Deliver this statement verbally to multiple people and ask for feedback.  Once you're satisfied, move on to the next module.

Module 2: Who Are You Offering To?
The reason the customer target market module comes next is to help you assess whether your offering has sufficient value for customers by testing it with them first.  This justifies the economic purpose of most business models, which is to make money.
In this module, we'll go through a series of steps to help you develop an initial list of customers to approach to get answers to such critical questions as:  

1.              How much are they willing to pay?  
2.              How many times do they purchase in a year? 
3.              What is the sales cycle time?  
The point is to make sure that your target market is not too small or too limited to support the business model that you are trying to build.  Make a logical estimate based on a foundation of rational facts, and decide if you can live with the estimate of the addressable market size.
At the end of this module, you should produce an initial list of customers to approach.  You will be able to describe your target customer market in terms of a demographic profile, which will help you reach more prospective customers.  
You don't want to enter a market and learn that it only has 109 potential customers.  Therefore, you should have a quantitative understanding of your total customer target market.  You probably will not be able to describe your target market accurately in one number, but having an acceptable range of numbers for the addressable customer target market is more than sufficient.
At this point, you might be wondering, "Where the hell do I get that information?"  Examples of potential sources of quantifying your target market include: 

·                  Trade associations
·                  Industry databases
·                  Private research
·                  Trade publications
·                  List brokers
·                  Internet sources such as Reference USA, Dun & Bradstreet's Million Dollar Database, or Hoover's Online
Customer demographics are objective descriptors of a population.  When searched in a large database, the demographics serve as criteria to narrow down the database to a quantifiable number.  Try this after completing the One-Hour Business Plan foundation in writing when you need to identify additional target market customers.
After listing the customer demographics, combine them to form a demographic profile.  A demographic profile provides enough information about a typical group member to create a mental picture of the group for target marketing purposes.  This mental picture helps you choose the marketing methods most likely to reach your customer target market for responses, which become sales leads for follow-up to convert into customers.
An example of an addressable customer target market description is:  a business-to-business (B2B) marketer for website ecommerce targeting business owners with more than $100,000 in revenue and five or more employees in the business-to-consumer (B2C) industry, with an existing website and within a 100-mile radius of Houston, Texas.  
A list of these prospective target market customers can be acquired through the aforementioned sources and others.  Afterward, you will not only have the approximate number of customers in this market, but also their contact information to market to them.
Customer categories are groups of customers with common purchases.  For established businesses, it helps to know existing and prospective customer categories for target marketing and avoiding marketing to customers who do not purchase the category being marketed.  
For new business ventures, it is insufficient to only list and describe customer categories as the target market, if you stop there.  Categories by themselves are too broad to market to.  Names and contact information are paramount.  
Too many entrepreneurs describe their customer target market in terms of categories only.  If you have little time or energy, create a mental picture of your demographic profile for the customer target market and simply create a list of people who fit that profile to offer your value proposition to.  This is the written exercise at the end of this module.
The initial list of prospective customers who might purchase your offering should not be too difficult to find.  You created your business idea with people or businesses in mind that might purchase the concept.  
However, it is the second list, or second phase of customers, that entrepreneurs seem to struggle with the most—perhaps because second-phase customers are inherently unknown and must be acquired through marketing.  
Second-phase customers are defined as customers who purchase an offering after the first phase of customers purchase through various marketing methods.  Second-phase customers are a common new-venture problem to manage and need special attention in the form of target marketing management.
Only the fortunate few are unconcerned about where new customers will come from.  We'll now explore various methods for sales, marketing, advertising, and public relations, which support the inevitable effort of finding new customers.  The goal is to get you thinking in new ways about how to draw in and reach out to the next customer for your business.
To support this principle visually, think of the four methods of reaching customers—public relations, advertising, marketing, and sales—as a funnel that circulates and recycles again and again:
 
 
·                  The widest part of the funnel (public relations) has the broadest reach around the customer target market.  
·                  The next phase of the funnel (advertising) narrows down the customer target market by getting closer to your customer. 
·                  The third stage of the funnel (marketing) gets closer still to the customer by narrowing the customer target market by reaching mostly those who might be interested in the offering.  
·                  The final stage of the funnel (sales) puts you in front of the decision makers who interested on some level in your offering. 
What does your funnel look like?  Let's build the customer target market funnel from four basic parts, from the widest audience reach to the narrowest focus via public relations, advertising, marketing, and sales.  We'll define the terms, present a menu of choices, and have you choose one method to build your funnel for second-stage customers.
The role of public relations is to craft and maintain the corporation's image.  The hunger for quality content from all forms of media, plus rapidly developing PR Internet tools, in conjunction with the need to reach more potential customers, has unleashed the benefits of PR for small business owners as well as corporations.
For our purpose here, we'll look at PR as a method to develop market awareness for your value proposition.
Think about PR in ways that benefit the triad of people or entities involved in the process:  you, the media, and the reader/listener/viewer collectively.  If you overlook or ignore the needs of one of the PR triangle members, then the PR process breaks down and the results will disappoint you.  
What do the media want from its content?  They want to sell more advertising.  How do they sell more advertising?  By attracting more readers, viewers, and listeners.  
Quality content alone is of little value to the media if the content does not increase the number of readers, viewers, or listeners.  If you choose a PR method, remember the PR triangle and account for the needs of each participant before releasing PR materials.
As a rule of thumb, remember to promote the benefits, not the features, of your value proposition from Module 1.  Always suggest the next step for your potential customer in any PR document so you can track responses. 
Here is a short list of PR methods.  Choose one of these methods to build awareness for your value proposition:

·                  Press releases—electronic and print
·                  Speaking engagements
·                  Community sponsorship
·                  Nonprofit board membership
·                  Volunteer for charitable organizations
·                  Industry events—national and local
·                  Other
Before you select an advertising method for your venture, take note if your business model is business-to-business or business-to-consumer. 
Marketing research has concluded that B2C business models respond to advertising significantly more favorably than B2B business models.  This makes sense.  Consumers are exposed more to advertising and the targeting reach is broader for consumer products than for industrial offerings.  
B2B prospective customers respond best to face-to-face selling, while B2C prospective customers respond best to advertising.  Advertising is third or fourth on the list of responsiveness in methods for B2B.
Advertising can be very expensive.  Don't go nuts with your selections here if you are a start-up.  Again, your advertising needs to be tested on a small scale first to assess its effectiveness in generating responses to preserve your limited resources.  
Advertising is arguably the most expensive, and consequently risky, part of the funnel.  Recognize it as such and treat it as one ingredient in the customer acquisition recipe.  Your early investment in advertising, or any marketing method, must pay off now.
Find an industry mentor or out-of-market competitor and ask what their most effective advertising methods have been.  Why not learn from their experiences as opposed to your own life savings?  
This is part of the beauty of quality strategic business planning—to learn in simulation and testing before launching a full advertising campaign.  
From the following advertising methods, choose one you can afford and that you believe will generate customer responses:

·                  Print, including ads in newspapers, magazines, newsletters, and so on
·                  Radio
·                  Television
·                  Outdoor signs
·                  Direct mail campaigns
·                  Electronic advertising, including banner ads, click-through, Web links, e-directory links, email campaigns, cross-website links, blogs, e-newsletters, SEO, Web white papers, social media, and Web public relations
·                  Other
Marketing certainly has changed over the last few business cycles, and it continues to evolve in new exciting, frustrating, and creative ways.  Through a cost-effective marketing testing process, you can conservatively test various marketing methods to find the ones that will provide you with the greatest return on your marketing dollar.  
The reward at the end of this long and winding road is a set of marketing methods that you can turn on and off to fill or drain your customer sales funnel based on your needs, lifestyle objectives, or work capacities.
However, this is far from easy.  In fact, please do yourself a favor and assume the worst-case marketing scenario.  Most businesses or new offerings fail because of overly optimistic assumptions about the future success of the marketing methods they select.  
You will create the best possible value proposition and the best possible product or service you can.  You will take your offering to the market, expecting nothing but success, and people will ignore your offerings on all levels.  This is what is most likely to happen to your early marketing methods, particularly if you do not test them first.
That is why you must go through this mental exercise, choose PR, advertising, marketing, and sales methods, and test them before committing full resources to them.  The ultimate success or failure of your new business initiative depends on it.  
Now it's time to select at least one marketing method that you believe will generate prospective customer sales leads for your second-stage sales campaign:

·                  Printed materials, including brochures, catalogues, and product sell sheets
·                  Electronic media, including website, email, CD, Internet, video presentations, and search engines
·                  Reference resources, including directories, associations, phone books, and lists, (both electronic and nonelectronic)
·                  Trade shows
·                  Direct mail
·                  Association activities
·                  Social networking
·                  Mobile marketing
·                  Networking
·                  Referral marketing
·                  Other
The final part of the funnel involves sales.  In the new-venture planning stage, the typical business plan tends to abdicate the selling process to someone else.  Remember that it is highly unlikely that anyone is more passionate, or more capable of selling your offering than you in the early stages of your new offering.  
If you are new to entrepreneurship, make the commitment now to select sales methods with which you are most comfortable.  Your success during these most vulnerable months and years depends on it.  
The good news about how selling has evolved over the years is that there are sales methods available that your prospective customers are comfortable with.  Few of us enjoy being "sold."  Fewer still like to be "closed" during the sales process.  
However, when your offering is presented to prospective customers in a way that clearly fills a need or solves a problem, customer acquisition becomes a natural step in the relationship.  Your task is to find the most comfortable sales process for both you and your customers. 
The sales methods in the following list are self-explanatory.  Choose a method that suits your personality, industry, business model, and customers:

·                  Personal selling
·                  Company salesperson:  in-house, road warrior, or combination
·                  Independent manufacturer's representative—someone who sells on a commission percentage basis
·                  Electronic sales
·                  Telemarketing
·                  Trade shows
·                  Free product or service
·                  Other
Now, gather your electronic address book, written address book, Rolodex, Palm Pilot, mobile phone, business card collection, telephone book, association membership directory, other directory, or any means you use to store business contacts. 
Take one minute to record your PR, advertising, marketing, and sales methods on a sheet of paper.  Then, in nine minutes, use your lists of contacts to write as many names and business names as you can.  You can go back later and add addresses, email addresses, and phone numbers for your contacts.  
After nine minutes, you should have a minimum of 5 and a maximum of 90.  If you have a management team, have all members list as many potential customers as they can and give the winner a prize. 

Module 3: Who Are Your Competitors?
The competitive positioning module comes next because it is most closely linked with the customer target in the prospective customer's mind.  While you are pitching, presenting, or marketing your offer to prospective customers, they are making evaluations, creating opinions, and making final judgments about your offering.  
In this module, we will create a competitor table.  A well-done competitor table succinctly portrays a value proposition offering relative to your competition in tabular form.  The columns provide your top two competitors by name.  The rows list the most important attributes of the value proposition offerings, as determined by the customer.  
The table lays out the decision-making process of the customer among competitors.  It forces you to be clear, brief, and concise.
If you do not know who your competitors are or how to find them, there are three sources you can use:

·                  First, identify your North American Industry Classification System code and your Standard Industry Classification code.  You can find both on the NAICS Association's website at www.naics.com for free.  You can use these codes to identify competitors in the arena in which you compete.  If you cannot find a code close to your business model, then you will need another competitive intelligence source.  
·                  A second source is the industry association serving the customers and competitors in the industry in which you compete.  There is an industry association for most businesses.  If a search engine does not identify one, try the Directory of Associations at www.directoryofassociations.com/directory.  There are many other association directories on the Internet.  
·                  A third quality source of competitive intelligence is networking with industry suppliers and competitors outside of your geographic or market area.  Tell them your value proposition and your customer target market and ask them to help you identify the competitors in your area. 
Your goal is to identify your most direct competitors before offering your value proposition to prospective customers.  It also helps you complete your competitor table.


At this point, it might be helpful to consider an example of a competitor table.  Let's say that you have had a lifelong passion for gardening and horticulture and want to open up a garden center, which you call Jayhawk Garden Center.  You live in Overland Park, Kansas, southwest of Kansas City, Missouri.  
Your value proposition focuses on unique and distinctive nursery stock for area residents who have a desire for distinctive plants, shrubs, trees, and colorful flowers, preferably native to the area, hardy, and just plain different from what can be found at a chain-store garden center.  
You want to help your customers create gardens and potted plants that are different from their neighbors' gardens.  Your goal is to provide a leisurely shopping experience for your customers so they will come to your store for a gardening event, linger in your cafe, and purchase some unique plants, trees, or shrubs.  You want your customers to savor the shopping experience like they would in a garden center in England, as opposed to the typical rushed garden center shopping experience in the United States.
You have identified your competitors, Wildcat Garden Center and Home Depot, while driving within a 10-mile radius of your proposed location.  After delivering your value proposition to 10 prospective customers before you open, you have identified the most important factors your potential customers consider when they purchase "green goods."  When you complete the exercise at the end of Module 3, it looks something like the competitor table pictured here.
 



This exercise might be the most challenging one in terms of completion time.  But, a well-done competitor table is a gorgeous part of a business plan.  It captures the decision-making criteria for a customer target market, and accounts for various value propositionscompeting for customer money.  
Now, complete as much of the competitor table as you can in 10 minutes. 
For your business and for each competitor, write down the value proposition, core products or services, value-added offering, customer geographic territory served, industries served, and pricing strategy.

Module 4: What's Next?
Business school teaches us that milestones occur approximately every 90 days, or quarterly throughout the calendar year.  They are normally broader than a goal and narrower than a mission statement. 
Milestones represent significant events in the life of a business.  How can you possibly predict what your business will be doing 90 days from now, let alone one, three, or even five years from now?  
To prepare milestones, you need to get comfortable with the ambiguity that forecasting inherently brings to the present.  You need to get comfortable with the fact that you will be wrong to some degree of error.
There is something very powerful about committing your milestones to writing and then working toward them.  It is the energy, effort, and process that count on the journey toward a business milestone, more than the due date or measuring metric. 
To write a business milestone for the future, you need three elements:  

1.              A significant business event
2.              A deliverable date
3.              A measurable description of the business event
The significant business event typically takes the form of a series of goals to achieve.  The deliverable date is normally expressed quarterly, but you can also set milestone periods of time such as semi-annual, annual, or multiyear.  
The measurable element of a future milestone enables either quantification or definitive determination, with a date in the future, and amply summarizes the series of objectives to prompt the business leader to monitor the milestone progress of an organization.  
What significant events do you want your business to experience?
If you are innovating something, such as a new product or service, an innovative division of an organization, or a new company, you can have milestones for the product or service development process, business-funding milestones, sales and marketing milestones, revenue milestones, employee milestones, operations milestones, and financial management milestones, to name a few.  
Here is a partial list of classic milestones in business:

·                  Completing the product or service prototype for customer testing
·                  Hiring the first employee
·                  Obtaining the first sales order
·                  Receiving your first customer check or payment
·                  Achieving your break-even sales revenue level
If you have investors or a loan officer, you need to be much more sensitive to committing to milestones than if you do not.  Investors and/or a bank participating in the funding of your business will recognize the value of milestones in monitoring progress quickly.  
If your funding, through debt or equity, is dependent on milestone achievement, do you really want to commit to milestones that are a reach to achieve?  If you do, then you will place yourself, your funding, and your business needlessly at risk.  
Instead, consider sandbagging, which is defined as "hiding the strength, skill, or difficulty of something or someone early in an engagement."  Sandbagging has a negative connotation in most competitive arenas, because it understates a skill level to win a competition.  In a business context, sandbagging should be used as a milestone quality control check.  
Think about it.  With the proper level of sandbagging built into your milestones, you can reduce uncertainty and business risks.  If your business funding depends on milestone achievement, then why wouldn't you understate the measurable to the highest degree you can without being detected? 
The business milestone and action planning exercise at the end of Module 4 should be in your mind as you prepare your daily, weekly, and monthly activities to achieve your quarterly future business milestone goals.  Before we work an action plan into strategic planning and milestones, let's first define the concepts and provide some quality control techniques to help you incorporate them into your business life.
Wikipedia describes a goal as "a desired result an animal, person, or a system envisions, plans, and commits to achieve—a personal or organizational desired end-point in some sort of assumed development."
You might be thinking that a goal sounds like a milestone, and you would be correct.  There are more similarities between goals and milestones then there are differences.  However, it is confusing when the terms are used interchangeably.  
The following distinction focuses on creating a process that helps you achieve your desired outcomes most appropriately.  In this light, a major distinction would be to separate a milestone from a goal in the context of time.  Think of milestones as broader, larger, and more encompassing than a goal.  Goals are portrayed here as action items within an action plan.
It helps to compare milestones and action plans to a staircase.  Imagine a milestone at the top of the stairs, the action plan being the series of stairs, and the action items inside the action plan representing the stairs themselves.  
Write one milestone that you want your business model to achieve within at least the next 90 days, and at most up to three years.  Then write an action plan to achieve that milestone.  
As you set milestones for your business, keep in mind that a milestone should include:

·                  A significant measurable event
·                  A due date
·                  One to three action items for achieving that milestone
·                  A person or entity responsible for each action item
·                  Accounts for resources required for each action item
If you can complete one milestone and one action item in less than 10 minutes, begin the second milestone and the second corresponding action plan to achieve it, also within the minimum time frame of 90 days to 3 years.  If time permits, write a third milestone and action plan.  You can always revisit your milestones, goals, and action plans later. 
Module 5: How Much Money Will You Make?
When the inevitable time arrives to forecast money, it becomes quitting time for most people.  They walk out of the room, leaving their business plan where it lies, never to return, never to face their fear of numbers.
That's why money is in Module 5.  If you are going to quit now, at least you have four modules done and you're ready to go to market.  
To accommodate both the entrepreneur who works quickly with numbers and the numerophobic who eventually gets there, we will address this module one step at a time, one transaction at a time, and in one sales cycle to predict revenue, Cost of Goods Sold, and gross profit.
We will ignore most expenses for now, except for those that enable you to achieve the first customer transaction.  After you achieve multiple customer transactions, you can manage expenses to gross profit, and ultimately against net income, after earning sales success in the marketplace. 
The Module 5 exercise is your mini-budget for now, which will help you create your more complex budget when it becomes necessary and appropriate to do so.
Before we begin, you need to understand four basic financial concepts to complete your mini-budget in the Module 5 exercise:

·                  Selling price
·                  Cost of goods sold
·                  Average sales cycle time or customer acquisition time
·                  Unit sales forecast
selling price is basically the money that you receive for your offering that your customer is willing to pay.  There are two fundamental methods to set your selling price:

·                  The first is the market-based method, where you know what your competitors' selling prices are for similar offerings.  You make an adjustment for your comparative value contribution up or down, and set the price that your prospective customer is most likely to pay.  
·                  The second method for setting a selling price is the mark-up method, where establishing a selling price accounts for any and all known costs associated with delivering your offering.  Make a note to focus on your direct versus indirect costs here.  Then mark up or add the profit that you need to deliver the offering.  
At times, you can mathematically use the markup method of setting a price without accounting for the fair value exchange required by both parties to transact.  Therefore, use both methods and set the price that both you and your customer will most likely perceive as fair.  Make a note of the selling price for your new offering.
Cost of goods sold (COGS) is also known as cost of sales, unit cost, or bill of materials.  If you still need a handle on what COGS is, simply think about who you pay—your suppliers, subcontractors, and employees—to directly deliver your product or service offering. 
For entrepreneurs with a product offering, it is relatively easy.  Simply estimate your material costs, direct labor costs, packaging costs, and inland freight, and you are done for now.
Service-offering entrepreneurs might argue, "I don't have any direct costs; it's just me making the offering."  If this is you, at least think about what you are ultimately going to have to directly pay your first employee, subcontractor, or supplier to deliver your service offering.  
Do you have any printed or electronic materials that you need to purchase to directly deliver your service offering?  Do you have any training that you or your employees need to deliver the service offering for which you need to pay?  Do you have to travel to your customer, who may or may not reimburse you via your customer invoice?  Estimate and total your costs directly attributable to the service offering to your customer, or just enter $0.00 for COGS.
Make a note of your estimate for COGS and we will move on to the next key forecasting metric, the average sales cycle time/customer acquisition time.
How many days does it take you to acquire your first customer?  How many days will it take to acquire your second, third, tenth, or even hundredth?  Did you complete the Module 2 exercise regarding your customer target market list? 
You might say, "I don't know how long it will take me to acquire my first or third customer, let alone my hundredth customer."  While you do not know with 100 percent certainty the average sales cycle time, before you can have a valuable and useful miniature business plan, you will need to estimate and later refine your average sales cycle time as a key business model performance indicator.  
Talk to salespeople and other business owners in your industry and ask them, "How long does it take you on average to sell your offering from the initial contact point until the customer invoice?"
Salespeople inherently enjoy talking.  They are used to getting rejected most of the time, and having someone approach them about what they do is a breath of fresh air.  Just respect them as the professionals they are—and avoid questioning direct competitors in your geographic competitive arena, for obvious reasons.
Business owners are also a quality source for average sales cycle time.  With the right questions, you should be able to get an estimated range from them. 
If you need to, talk to more people about their average sales cycle time; anyone else working on the front end of the business model rather than the back end should be helpful, although a well-integrated chief financial officer or company controller might have literal knowledge.
For your first sales cycle time estimate, give yourself a break.  Underpromise and overdeliver it now, and write down the average number of days.
Now the fun starts.  It's time to make a unit sales forecast.  In other words, you need to predict how many units of your offering you can sell in your average sales cycle time.
For simplicity, let's start with month one after you record month zero, if your sales cycle time is longer than one month.  You are only being asked to predict a business planning estimate of the approximate number of customers you can reasonably expect to acquire in one month's time. 
For some it is easy, for others more difficult.  We will focus now on the entrepreneur who finds this estimate challenging.
Here are some prompts to help you answer this question:

·                  How many customers can you approach in one month?  Not comfortably or uncomfortably, but with a mild amount of pressure to challenge yourself as the best representative of your offering.  
·                  By now, you have a list of prospective customers from Module 2.  Looking at that list of prospective customers, which of them are most likely to buy from you in month 1?
·                  After you start your PR, advertising, and marketing methods from the customer target market funnel, how long do you think it will take to invoice a prospective customer who has responded to your offering?  How many of those can you close in one month's time?
Don't concern yourself with being right or wrong for now.  Just get started on your new offering business journey by estimating your first month's unit sales and writing it down.
You have just completed the necessary inputs for forecasting month 1's gross profit dollars.  All we have to do is provide some sense of structure and repetition for the Module 5 exercise unit sales estimate.
First, deduct one minute, calculated with four numbers at 15 seconds, for your earlier written preparation.  You have nine minutes left. 
All you have to do here is:

·                  First, transfer the four numbers from the earlier steps, in which you estimated your selling price, COGS, average sales cycle time, and unit sales for month
·                  Second, look at the average sales cycle time and estimate unit sales for month 2 and month 3. 
·                  Third, estimate the sales and marketing money you will have to spend to acquire your initial customers for your new offering from Module
Now that you know what to do next to make this mini-budget come alive in your business model, consider building this forecast iteratively (using multiple revisions) and incrementally (in sequential stages) until it's complete.
You have revealed the key metric inputs for your business model.  Then you showed your sales and gross profit for your new offering for your first customer transaction.  Subsequently, you have already captured your go-to-market expenses.  Although you have not done your calculations yet, you have set up the initial answer to the problem of "How much money will I make?" 
Pulling It All Together
The final ten minutes of your One-Hour Business Plan foundation are intended to pull together your five worksheets in a way that works best for you to go to market and acquire your first customers. 
The five cornerstones that we explored in the five modules embody a business plan foundation common in most successful business models:

1.              Value proposition
2.              Customer target market
3.              Competitive positioning
4.              Milestones and action planning
5.              Money forecast
The final 10 minutes of the One-Hour Business Plan foundation are designed for stepping back from what you wrote and making decisions about what you need to work on most.  Perhaps your final 10 minutes of planning should focus on Modules 1 and 5.  Then after testing your marketing methods, refine Module 2. 
Spend your final 10 minutes planning for whatever you feel that you need to work on the most, and trust your instincts.  You make the call.
You have just created your own One-Hour Business Plan foundation.  Congratulations!
Remember that you have completed a business plan foundation here, not a complete business plan.  Don't forget to come back to your plan foundation and write your complete business plan after you have gone to market and exchanged your offering for money.
If you follow this planning sequence, you will have a clearer vision, more detailed written guidance, and a permeation of planning throughout your business activities. 
There is no one best way to write a business plan for everyone.  People have different learning styles, experiences, dreams, needs, and missions to fulfill in life.  Business plans that were less than 10 pages in length, outlines, slide decks, tape recordings, videos, and scratch pad notes with illegible handwriting have built some of the most successful businesses in the United States.  The common thread among all of them is the five cornerstones of a business plan foundation which we have explored.  
It matters not how you express your plan foundation cornerstones, but it does matter that you write it down.  The power is not in the thinking, talking, or dreaming alone.  The power is in the writing.
Of course, writing is the hard part.  Therefore, the One-Hour Business Plan foundation process by design contains minimal writing time and maximum thinking time.  Ten minutes of writing time after each of the five cornerstone modules, plus the final 10 minutes, bring it all together and prioritize your go-to-market activities.  
You can do this!  It only takes one hour if you organize your thoughts, focus your attention on the most important cornerstones, and build your business plan foundation and ultimately your business model.  Afterward, you will have broken through the barrier to quality strategic business planning. 

About the Author
John McAdam helps ordinary people become entrepreneurs, and helps entrepreneurs, business owners, and CEOs become successful.  
John is a "been there, done that" hired CEO and serial entrepreneur with decades of real-world experience in both private and public companies and an MBA from the Wharton School. Through his consulting company Pioneer Business Ventures, John focuses on helping companies increase sales, reduce expenses, and optimize processes to make more money. 
John is passionately committed to helping small businesses succeed. For years, he has been sharing his experience and expertise with Philadelphia-area entrepreneurs as an instructor in strategic business planning at the Wharton Small Business Development Center and as a guest host and speaker for NBC 10 Philadelphia Small Business Week and Money Matters TV.
If you would like more guidance on your business planning worksheets, submit them for free feedback and a trial business club membership at http://planfoundations.com/trial.
825 75th Street, Willowbrook, Illinois 60527
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2 comments:

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